Scicom to face selling pressure
KUALA LUMPUR: Scicom (MSC) Bhd (Scicom) is expected to face selling pressure following the group’s removal from the list of syariah compliant company securities, analysts observed.
In a recent filing on Bursa Malaysia, Scicom informed that the company received a letter from the Securities Commission Malaysia (SC) by fax on March 1, 2019 informing that the company will not be listed as a syariah compliant company securities when the list of syariah compliant securities are announced on May 31, 2019.
“We expect selling pressure in regards to this announcement as some syariah-compliant funds may have to trim their stake in order to comply with their mandates,” the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) said.
On Scicom’s other announcement that day, MIDF Research was more positive on the outcome of a recent legal case involving Tawasol Al-Sharq Marketing Services (Tawasol).
As per its filing, Scicom announced that the company had received a Notification on March 3, 2019 from the High Court of Singapore that Tawasol (the plaintiff ) has wholly discontinued the claim against the Company.
“The costs of the case are to be paid by the plaintiff to the company with the sum to be fixed, taxed or agreed,” the filing read.
According to the research arm, the writ of summons was served on October 28, 2018, claiming a sum of approximately RM1.7 million over a debt recovery Nokia Private Ltd. Scicom was a second defendant in the case.
Overall, MID F Research made no changes to its earnings estimates, which was based on financial year 2019 (FY19) earnings per share (EPS) of 8.04 sen.
“However, we view the removal from the syariah compliant list as a negative and revise our valuation from 17-fold price earnings ratio (PER) to 15-fold PER, which is one SD below its five-year average.”
The research arm also maintained its ‘neutral’ recommendation on Scicom due to the unexciting earnings prospect in the nearterm.
It noted that this is in view of the slower than expected sizeable project win.
“On the flipside, Scicom’s balance sheet is still strong with a net cash of RM39.8 million which can support its dividend yield that is estimated at 6.4 per cent.”