Brokers' take: CGS-CIMB raises Silverlake target to S$0.35 on tech investment appetite

MAINBOARD-LISTED Silverlake Axis may see its earnings recover as demand for its technology solutions from banks recovers after they held back on capital expenditure and tech spending over the past few quarters, said CGS-CIMB analyst Andrea Choong.

In a report dated July 9, Ms Choong said that the roll-out of Mobius, a cloud-based core banking system, is core to Silverlake's earnings recovery as she maintained "buy" on the company with a raised target price of S$0.35 from S$0.31.

Already, the financial software provider is finalising its first order win from a top-tier bank in Thailand with a contract value of around RM40 million (S$12.9 million) to RM50 million. She also noted that the company is the core banking system provider for several digital bank licence applicants in Malaysia.

Aside from its push into Thailand and Indonesia, the analyst also liked that Mobius' pricing structure of lower upfront capital outlay for customers and billings spread out over the coming years will be a key client conversion tool.

"We think that the stamp of credibility from Mobius' first deal will be a key catalyst for further order wins, alongside SILV's (Silverlake's) efforts in converting clients of one of its products reaching end-of-life in 2023 onto this cloud-based platform," Ms Choong said.

Furthermore, she believes that investment hesitancy of banks are bottoming out and sees significant prospects from deferred core banking deals returning.

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As such, the analyst expects Silverlake to record a net profit of RM45 million for its fourth quarter ended in June 2021 with potential margin upside coming from software licensing order wins.

Shares of Silverlake closed at 28.5 Singapore cents on Monday, up 1.79 per cent or 0.5 cent.