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Wednesday, February 27, 2013

Censof (5195) - A Strong Financial Performance that Exceeds Analyst Expectations, A Research House Revised Target Price to RM0.61


While most companies would be contented to just breakeven or post a slight profit amidst the slowing economy and market uncertainty, Censof Holdings Bhd (Censof) surpassed analyst expectations by posting a stronger financial year 2012 (FY12) net profit of RM9.4 mil. 

According to industry sources, Khazanah Nasional Berhad had recently shortlisted Censof as one of the five candidates to submit an indicative bid to acquire its 45.03% stake in Time Engineering Bhd. The Group is definitely building on solid fundamentals and paving its road to an exciting business potential  into the near future.

YoY, FY12 revenue rose slightly to RM44.5m (+2.7%) due to higher revenue contribution from projects e.g. ICMS & Outcome Based Budgeting (OBB) project, which has been c.80% completed thus far according to management. The net profit increased further to RM9.4m (FY11: RM8.8m) due to: 1) higher contribution from its higher GP margin maintenance project i.e. the LHDN maintenance services project, which lifted the EBIT margin to 22.7% (vs. 22.3% previously), and 2) a lower effective tax rate incurred of 2.5% (FY11:2.6%).

QoQ, 4Q12, revenue rose RM17.9m as compared to RM5.3m in 3Q12, boosted by 1) higher revenue from FMSS segment at RM14.5m (vs. RM4.3m previously) as a result of higher revenue recognition from Outcome Base Budgeting (OBB) project and 2) an additional revenue contribution of RM1.5m from KnowledgeCom, a new subsidiary acquired by the Grop in Nov12, which mainly provides corporate IT training services. 

A prominent Research House (Kenanga) revised up FY13-14E net profit by 3.7% - 4.8% to RM17.5m - RM15.9m, with an increase in topline by 1.2% and 4.2% to RM73.4m and RM81.1m from additional revenue contribution from KnowledgeCom. 



Forecast and Valuations
FY 2012(A)
FY2013(E)
FY2014(E)
Turnover (RM Mil)
44.5
73.4
81.1
EBIT
10.1
18.7
16.9
Profit after Tax (RM Mil)
9.4
17.5
15.9
Consensus (NP)

15.0
16.7
Earnings Revision

+3.7%
+4.8%
EPS (Sen)
2.7
5.0
4.5
PER
14.1
7.8
8.5


Inline with its performance and forecast revenue and profitability, Kenanga revised its target price upwards to RM0.61 and provide a market OUTPERFORM call on the counter. 

Investors should look out for moves on good volume. Right now, the counter is testing the proverbial waters and drifting upwards.


Future Prospects Censof’s long term outlook remained intact, underpinned by its active tendering of contracts for both the Indonesian and Malaysian markets for its Financial Management System Solutions (FMSS) segment. Other positive factors were continued projects flow from the various government agencies where it is now serving over 27 ministries and 80 government agencies in the country. It is also anticipated that Censof may very well benefit from the potential implementation of GST after the imminent General Election.


Projects   Century Software (Malaysia) Sdn Bhd, a wholly owned subsidiary of Censof, has been awarded a new project by Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN) for the upgrading of the latter's financial management system worth RM1.7m over a 2-year period commencing from 5 February 2013 until 4 February 2015.

The Group’s subsidiary, Knowledgecom Corporation Sdn Bhd has also received a Letter of Award dated 21 February 2013 (Ref No. : (42)PSMB/27/55 Klt.3) from Kementerian Sumber Manusia of Pembangunan Sumber Manusia Berhad (545143-D) (“PSMB”) for a project named “Specialised Training and Advanced Recruitment (“STAR”)” for a contract sum of RM1.05 million from PSMB (“the Project”). 
Bearing any unforseen circumstances, the Board is of the opinion that the Projects will contribute positively to the earnings per share and the future earnings of Censof Group. 
Last June, Censof won a project with the Ministry of Finance,to develop a state-of-the-art system to cater for outcome-based budgeting (OBB). This national project is a catalyst to Censof and the Group sees this as a stepping stone to a new market. OBB revolutionised the budgeting and planning process, promoting performance and result as key objectives, focusing on the outcome of the programs and activities in line with national key results area.
The Group also expects Censof ’s business to grow at a rapid rate in the foreseeable future as the government as well as the corporate sector, in their quest to strengthen effectiveness and efficiencyin delivery systems, execute initiatives to improve security and connectivity infrastructure.


Awards    Censof has bagged numerous awards in the past few years. Last year, the company’s 100% fully home-grown software, Censof Government, clinched the ‘Best Software Product’ award at the NEF-Awani ICT Awards 2010 which was presented by the Prime Minister. 

Censof recently won the top honors when it bagged the Prominent ICT Company Award at the 3rd Malaysia Independence Award 1957 @ Anugerah Merdeka dinner, co-hosted by SME Global Centre and Branding & Franchise Magazine.

The Group aims to be a regional player within the next three to five years with plans to establish its presence into countries like Vietnam, Thailand and Cambodia and further afield. Censof is currently in talks with companies from Taiwan and South Korea.

Its wholly owned subsidiary, Century Software (M) Sdn. Bhd (“CSM”), is presently the only one of two companies recognised by the Malaysian government to be a Standard Accounting System for Government Agencies (“SAGA”) compliant FMSS provider.