Cambodia project a major earnings catalyst for Scicom

KUALA LUMPUR: Affin Hwang Capital Research has reiterated its buy rating on Scicom Bhd with a higher target price of RM2.93 based on 20x FY19E price-earnings after imputing the earnings projections for its recently secured Cambodia Tourism project.

Scicom secured a project to develop, implement, operate and maintain a fully integrated Tourism Management System for the country's Ministry of Tourism.

"The project gives Scicom an exposure to the fast-growing Cambodia tourism market (2016A: 2.7m international tourist arrivals by air, US$3.2bn total tourism receipts).

"Assuming a fee of US$1 per international tourist per flight (payable to Scicom), and EBITDA margins of 45%, the project should contribute RM12m-16m of net profit in FY19-20E (~22-27% of group’s net profit)," the research firm said.

It noted that Scicom's share price has dropped 15% on year due to weaker 6MFY18 net profit and a long lull since the last major contract win in 2013. 

"Moving into 1HCY18, we expect an increase in Education Malaysia Global Services (EMGS) fee collection (+20%) to mitigate the impact from a lower number of foreign student applications.

"Elsewhere, we expect its business process outsourcing (BPO) business volume to stablise, before recovering in 2HCY18. However, the higher 2HFY18 pretax profit would be offset by normalisation of tax rate to >20% (from 10% in 1HFY18)."
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