Scicom continues to enhance BPO and EMGS business
KUCHING: Scicom MSC Bhd (Scicom) continued to grow its business in the business process outsourcing (BPO) segment and the Education Malaysia Global Services (EMGS) division.
Affin Hwang Investment Bank Bhd (Affin Hwang) yesterday said Scicom’s BPO segment and the EMGS contract for the online application of visa for foreign students continued to grow.
The research firm was confident that Scicom would be able to extend its electronic-government services regionally.
Meanwhile, Scicom on Tuesday told Bursa Malaysia that the group registered higher revenue and net profit for the second quarter of financial year 2017 (2QFY17) ended December 2016.
Scicom noted net profit for 2QFY17 grew by 17 per cent yearon-year (y-o-y) to RM12.11 million while 2QFY17 revenue increased by 8.2 per cent y-o-y to RM51.56 million.
For the six months of financial year 2017 ( 6MFY17) ended December 2016, Scicom added revenue gained by 12.2 per cent y-o-y to RM103.61 million while earnings improved by 20.3 per cent y-o-y to RM24.14 million.
Affin Hwang observed that the company’s increased revenue in 6MFY17 was due to new BPO contracts as well as growth from existing clients and the EMGS contract.
The research firm gathered that the company’s core net profit for 6MFY17 rose by 12 per cent y-o-y to RM22 million after excluding foreign exchange gains.
Affin Hwang opined that Scicom’s financial results for 2QFY17 and 6MFY17 were within its expectations, accounted for 47 per cent of its forecast for the company in financial year 2017 (FY17).
Based on historical trends, the research firm observed that the company’s first half earnings normally account for about 46 per cent of the full-year earnings due to seasonality at the BPO segment.
It added the company’s earnings before interest, tax, depreciation and amortisation (ebitda) margin continued to improve, by 2.3 percentage points to 26.3 per cent in 6MFY17 due to cost efficiencies from economies of scale.
Going forward, Affin Hwang believed that the company’s earnings from the EMGS segment should grow in tandem with a rising number of foreign student visa applications supported by stable earnings from the BPO business.
The research firm remained optimistic of the group’s foray into electronic-government (egovernment) service contracts regionally as the group already has the expertise to expand and is actively seeking those contracts.
Besides that, Scicom’s Multimedia Super Corridor (MSC) status expires in November 2017 and the company’s business income is 70 per cent tax-exempt instead of 100 per cent taxexempt for the remainder of its MSC status from November 2015 onwards.
Interestingly, the research firm observed that Scicom’s 100 per cent-owned subsidiary, Scicom E Solutions Sdn Bhd has been granted the MSC status, which may mean that new contracts can qualify for the 100 per cent tax exemption.
As a result, Affin Hwang continued to favour Scicom’s prospects and it opined that the company is an attractive egovernment service play.
In the meantime, the research firm maintained its earnings forecasts for Scicom while reaffirmed its ‘buy’ recommendation of the company’s shares, with a fair value of RM2.74 per share based on an estimated 2017 earnings per share (EPS) of 20 times.