FY22 results in line, revenue at a record high with broad-based improvement
Record high revenue, exceeding previous high in FY19 by 8%. Silverlake reported FY22 revenue of RM736.5m, up 18% y-o-y. Growth was broad-based, with project-related revenue surging 66% y-o-y to RM175m, despite the absence of bigger contracts (>RM100m). This was attributable to ongoing implementation of two new MÖBIUS contracts, which accounted for 37% of total project services revenue, and progressive revenue contributed from other ongoing projects.
The maintenance and enhancement services saw stable 5% growth. Overall recurring revenue accounted for 73% of total revenue vs 81% in FY21, as project-related revenue registered strong growth in FY22.
Strong contribution from project-related and insurance processing in 4Q22. In 4Q22, revenue grew 19% y-o-y (+16% q-o-q) to RM205.2m. This was mainly due to higher contributions from project related revenue segments as well as a resurgence in insurance ecosystem transactions and services, which jumped 46% y-o-y. Insurance processing activities and volumes have rebounded to pre-COVID levels.
DPS of 0.7Scts was declared for FY22, vs 0.52cts in FY21, with dividend payout ratio of 30% (28% in FY21).
Gross margin a tad lower but net margin improved y-o-y. Gross margin of 57.8% was lower than the 60.2% achieved in FY21, mainly due to higher provision for bonus payment of about RM35m. Net margin of 24.7% for FY22 was an improvement from 22.9% in FY21, on the back of lower administrative expenses and finance costs, following the end of the unwinding of discounts on contingent consideration payable for the acquisition of Silverlake Investment (SG) Pte. Ltd. Group in FY21.
Net profit in line. FY22 net profit of RM182.2m (+27% y-o-y) was in line with our expectations.
Expect strong order momentum to continue; MOBIUS seeing more enquiries, with about half from potential new customers. The group saw significant activity around core banking upgrades, modernisation and providing specialist services to help its customers to compete digitally. The new cloud native digital banking product MÖBIUS is also seeing increased enquiries from non-Silverlake customers.
Order backlog of RM470m; healthy project pipeline. Order backlog going into FY23 remains strong, at about RM470m. Project pipeline remains healthy, at about RM1.9bn. Out of this, about RM250m can be expected to close soon.
Growing orders clinched in 4Q22. The group has secured RM112m worth of contracts from 30 existing customers in 4Q22, which is higher than the average contract wins of about RM80-90m per quarter over the past two years. The contracts are primarily for enhancements to the existing core banking system and to enhance customers’ digital experience. These contracts are expected to be completed within 12 to 18 months from signing of the contracts.
No change in earnings; maintain BUY with higher TP of S$0.48. On the back of strong order momentum, we have tweaked revenue for FY23F and FY24F by 2% each, but gross margin was lowered by 1ppt to 60%, to align with the current trend. Overall, no change in earnings for FY23F/24F. Maintain BUY with a higher TP of S$0.48, pegged to a higher PE of 18x (previously 17x), near +0.5SD from the four-year average PE, on the back of strong order momentum.