Century Software Holding Berhad

CenSOF TP RM 0.98  from RM 0.68 (+44.1%) - BUY
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Government Contract Small Step for Larger Future Contracts
Century Software Holdings Bhd (CSHB) announced yesterday that it has won a
contract worth RM1mn from the Kumpulan Wang Persaraan (KWAP). The entire
project is expected to be completed within 8 months and entails the
development of an Integrated Contribution Management System (ICMS) for
KWAP. We understand that the system is the first of its kind in Malaysia. It was
developed using CSHB’s framework, and is set to revolutionize the operations
within KWAP by enhancing capability and capacity, streamlining current
processes and automating the overall management of pension contributions.
On the other hand, CSHB also announced that the Malaysian Issuing House Sdn.
Bhd. (MIH), a subsidiary of Symphony, has also acquired the skill‐sets from it to
breathe new life into MIH’s legacy IT platform, by re‐engineering the present
balloting system to meet the demands of modern day technological
requirements. The new balloting system will be a fully web‐based system
running on the Web 2.0 technology.

No Significant Impact
While no specific guidance was provided, based on our estimate, the contract
could boost CSHB’s EPS by less than 1% for FY11 (based on PBT margin of
30%). This will not significantly alter our earnings forecasts. Nevertheless, we
believe the contracts will bode well for CSHB given that both its subsidiaries,
CSM and TMX are participants of the Skim Jejak Jaya Bumiputera (SJJB). This,
we opine, will elevate CSHB’s chances of securing future government contracts
based on its historical success rate of up to 15% in bidding government
contracts.

Valuation

Maintain BUY on CSHB with a target price of RM0.98 ‐ translating to potential
upside of 44.1%. The target price is derived based on CY12 PER of 11.3x, i.e.
after pegging a 20% discount to the peer’s simple average CY12 PER of 14.1x.
We believe the discount is justified due to CSHB’s smaller market capitalization
and dependence on the domestic market.

Source: TA, Bernama