Scicom to see 34 per cent y-o-y decline in FY19 core net profit
0 month ago, 11-Aug-2019
KUCHING: Scicom (MSC) Bhd (Scicom) is expected to see a 34 per cent year on year (y-o-y) decline in financial year 2019 (FY19) core net profit due to lower contributions from the e-solutions segment and higher tax rate.
Affin Hwang Capital recapped that the groups first nine months of FY19 (9MFY19) core net profit declined by 44 per cent y-o-y to RM15.9 million due to lower contributions from the e-solutions business and normalisation of the effective tax rate, partly cushioned by higher revenue from the Business Process Outsourcing (BPO) segment.
While we expect a sequential uptick in 4Q19 earnings, Scicoms FY19E core net profit should still come in weaker y-o-y (down 34 per cent) due to the abovementioned reasons, translating to a lower full-year dividend of 6.3 sen (from nine sen in FY18A), the research firm noted.
Nonetheless, the weak earnings outlook is largely reflected in its weak share price performance (down 54 per cent in past one year), we believe.
Going forward, Affin Hwang Capital forecasted Scicoms FY20-21E core net profit to grow by five-six per cent per annum, driven by higher revenue contributions from both the BPO and e-solutions businesses on higher transaction volume.
On potential contract wins, the research firm did not factor in new contract wins in its FY20-21 earnings forecasts for the group.
Securing a major contract would materially improve Scicoms earnings prospects.
However, Affin Hwang Capital observed that the competition in the Integrated Immigration System (IIS) tender is stiff and the award of other major governmental processing systems, such as foreign workers tracking, may take longer than expected due to the (typically) prolonged approval process
As for the originating summons by (Education Malaysia Global Services) EMGS, the research firm did not incorporate any changes to its revenue forecasts in relation to the services provided to EMGS.
An unfavourable outcome from the Originating Summons and-or substantial deterioration in the working relationship between Scicom and EMGS may negatively affect the long-term earnings contributions from EMGS-related services.