SCICOM (MSC) BHD

Target Price: RM2.36

DESPITE declining net profits, MIDF Research said Scicom (MSC) Bhd’s earnings for the first half ended Dec 31, 2017, came within expectation, making up 50% of its and 46% of consensus estimates.

For the first half, Scicom’s net profit fell 15.6% to RM20.4mil as revenue declined by 14.3% to RM88.9mil.

Scicom saw its revenue from Malaysia slid by 10.9% to RM24.1mil, while revenue from Philippines dropped by 25% to RM11.3mil in the second quarter.

MIDF said the the lower revenue was due to change in requirements and strategies by its business processes outsourcing (BPO) customers.

Additionally, it is estimated to have processed lower number of visa applications for foreign students looking to study in Malaysia.

The research house said Scicom’s profit after tax fell sharper than revenue due to higher taxes.

Tax rate was at 12.2% during the quarter compared to 8.8% a year ago.

On a brighter note, MIDF said Scicom’s operating margin improved to 26% in second quarter from 23.3% year-on-yea indicating that management’s cost cutting measures are taking effect. On Scicom’s recent announcement on its Cambodian tourism project, MIDF Research expected the project to contribute positively to the company from FY19 onwards.

Scicom announced that it had been awarded a project to develop, implement, operate and maintain a fully integrated Cambodia Tourism Management System by the coun- try’s government.

The project will take five years with an extension option of two years. The income from this project will be tied to the number of air travellers to and from Cambodia. MIDF said the number of travellers to Cambodia was estimated at five million in 2016.

Nonetheless, it maintained its earnings forecast, pending a briefing today.