- Mid-teens revenue or PATMI growth pa guided for next five years. Order book of MYR280m offers visibility for next 15 months. Maintain BUY and DCF-based TP of SGD1.40 (WACC 9.3%).
- Opportunities from Malaysian bank mergers and OCBC’s recent acquisition of Wing Hang Bank.
- Strong finish to FY6/14. Core EPS beat by 12% on higher-than-expected sales. FY15E-17E EPS refined by -2% to +3%.
Management painted a rosy outlook in today’s analysts’ briefing. A potential merger of CIMB, RHB and MBSB should present opportunities. Outstanding orders of MYR280m will be delivered over the next 15 months. Management believes mid-teens revenue or PATMI annual growth is achievable over the next five years.
4QFY6/14’s robust PATMI was fuelled by software licencing sales (+42%). We see this as a positive indicator of recurring maintenance work.
Maintain BUY and TP of SGD1.40
We adjust our EPS by -2%/+3%/+3% for FY6/15E-17E, for a moderation in near-term expectations to reflect its latest guidance. The impending CIMB-RHB-MBSB merger implies medium-term earnings will improve on a higher workload for the combined entity.
We maintain our DCF-based TP of SGD1.40 (WACC 9.3%, TG 3%). With its entrenched market position, SAL should benefit from rising IT spending in the Asia-Pac’s banking market. Ongoing upgrading of ageing core banking systems should continue to drive sales of its flagship product. In particular, we expect SAL to participate in projects related to OCBC’s recent acquisition of Wing Hang Bank.
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