5 Key Takeaways from Silverlake Axis’s Latest Earnings

May 19, 2023

Singapore-listed and Malaysia-based technology firm Silverlake Axis Ltd (SGX: 5CP) recently reported its financial results for the third quarter of FY2023 (Q3 FY2023).

During the 9MFY2023, the leading enterprise technology, software, and services company saw a 6% increase in both its revenue and gross profit, hitting RM 563.6 million (S$167 million) and RM 333.8 million, respectively.

This growth spanned all revenue sectors, with recurring insurance ecosystem transactions and services witnessing a significant surge of 38% to RM 39 million during the same period.

Net profit, however, was slightly lower by 1% to RM 133.9 million during 9MFY2023 as compared to RM 134.8 million during the same period a year ago.

With such mixed results, here are five key takeaways from Silverlake Axis’s earnings during its 9MFY2023.

1. Recurring revenue edged higher

One of the key takeaways from the earnings report was the increase in Silverlake’s recurring revenue.

Source: Silverlake Axis’s Financial Highlights and Business Updates (9MFY2023)

The total recurring revenue includes the maintenance and enhancement services, insurance ecosystem transactions and services as well as the retail transactions processing.

During 9MFY2023, total recurring revenue rose by 5% to RM 415.1 million from RM 397.0 million in 9MFY2022.

This accounts for 75% of the Group’s overall revenue.

2. Gross profit margin remains stable at 59%

Aside from that, Silverlake Axis also managed to maintain a healthy gross profit margin of 59% during the financial period under review.

This was despite rising costs and inflationary pressure that has lead to an increase of 19% in total expenses to RM 168.6 million.

Silverlake Axis maintained an efficient cost-to-revenue ratio of 30%, outperforming the industry benchmark.

3. Strong growth in new contracts won

Silverlake Axis also demonstrated a strong demand for its products and services as year-to-date contracts won jumped by 38% to RM 540.8 million.

The Group also clinched its inaugural 10-year MÖBIUS digital banking deal worth millions with a Malaysian client, pushing the company’s gross value of current opportunities and deals pipeline to a solid RM 1.8 billion.

4. Strong cash balance to weather downturns

The Group also has a strong cash balance of RM 550 million, which gives Silverlake Axis 10 comfortable months of operating expenditure (OPEX) coverage.

This is important given the current rising interest rate environment and the uncertain economic recovery going forward.

5. MOBIUS continues to gain momentum

Looking to the future, Silverlake Axis is optimistic about the banking sector as it increasingly embraces digital transformation.

The firm’s cloud-native digital banking product, MÖBIUS, is making inroads in the market.

Despite the rising costs in the IT industry, Silverlake projects stable profit margins in the foreseeable future.

The company is also evaluating the use of AI, large language models, and machine learning to enhance its service offering.

Attractive opportunity as both short-term play and long-term growth

Based on these key highlights, I believe Silverlake Axis provides an attractive opportunity for both short-term and long-term growth.

The company’s strong financial performance, efficient cost management, and promising pipeline of opportunities signal potential for short-term gains.

For the long term, Silverlake’s strategic focus on digital transformation in banking, investment in emerging technologies, and its commitment to sustainable practices all lay a solid foundation for continued growth and resilience in the evolving tech industry.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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