On 19 Jan 2017, purchased 20,000 shares of Silverlake Axis at $0.570 each.
Since the year 2014. I have been following on this stock however I categorize it's as a high growth & high risk stock which prevent me from initiating a position .
But its constant excellent financial result & transformation keeps luring me back & eventually I decided to buy it .
A brief introduction of the Company :
Silverlake is a Software and Services Solutions provider for the Banking, Insurance, Payment, Retail and Logistics industries.
It is also the leading software provider for banks in South East Asia.
About 40% of the top 20 largest banks in SE .Asia uses Silverlake Axis core banking solution .
Its business span across Asia, Middle East & Eastern Europe .
1 of our Singapore bank (OCBC) are also using Silverlake core banking solution since 1994 which speaks the technical expertise & volume that Silverlake possess.
Below pic are the financial Highlights (extracted from Silverlake Annual Report)
As you can see, the net profit margin is at 41% to 55 % for the past 5 years. I must admit it is a very good business to be in but the competition is fierce ,other big players such as Oracle, Infosys n etc are also in this area of competence.
Now we shall look at the revenue composition of Silverlake.
The 2 main recurring revenue are from Maintenance & Enhancement Services & Software Licensing ,they formed 74% of Silverlake total revenue FY2016.
Basically, as long as the bank keeps on using Silverlake Core Banking Solution(CBS). It will have to pay the software license & Maintenance & Enhancement fees because ,its need a a team to maintain & upgrade its system as and when the bank required. So its revenue will continue to grow if Silverlake can clinch more banks contract for its CBS.
However, to replace a CBS from another vendor is a risky & costly move for the banks unless the existing CBS does not work for them anymore. This will also means it will not be easy for Silverlake to win new clients for its banking business.
Software projects & Sale of Software & Hardware products are non recurring revenue for Silverlake and this segment of the business is the most unpredictable which formed 19 % of the total revenue.
Insurance & Credits/Cards processing are recurring revenue but only formed 7% of the total revenue.
Since the year 2014. I have been following on this stock however I categorize it's as a high growth & high risk stock which prevent me from initiating a position .
But its constant excellent financial result & transformation keeps luring me back & eventually I decided to buy it .
A brief introduction of the Company :
Silverlake is a Software and Services Solutions provider for the Banking, Insurance, Payment, Retail and Logistics industries.
It is also the leading software provider for banks in South East Asia.
About 40% of the top 20 largest banks in SE .Asia uses Silverlake Axis core banking solution .
Its business span across Asia, Middle East & Eastern Europe .
1 of our Singapore bank (OCBC) are also using Silverlake core banking solution since 1994 which speaks the technical expertise & volume that Silverlake possess.
Below pic are the financial Highlights (extracted from Silverlake Annual Report)
As you can see, the net profit margin is at 41% to 55 % for the past 5 years. I must admit it is a very good business to be in but the competition is fierce ,other big players such as Oracle, Infosys n etc are also in this area of competence.
Now we shall look at the revenue composition of Silverlake.
The 2 main recurring revenue are from Maintenance & Enhancement Services & Software Licensing ,they formed 74% of Silverlake total revenue FY2016.
Basically, as long as the bank keeps on using Silverlake Core Banking Solution(CBS). It will have to pay the software license & Maintenance & Enhancement fees because ,its need a a team to maintain & upgrade its system as and when the bank required. So its revenue will continue to grow if Silverlake can clinch more banks contract for its CBS.
However, to replace a CBS from another vendor is a risky & costly move for the banks unless the existing CBS does not work for them anymore. This will also means it will not be easy for Silverlake to win new clients for its banking business.
Software projects & Sale of Software & Hardware products are non recurring revenue for Silverlake and this segment of the business is the most unpredictable which formed 19 % of the total revenue.
Insurance & Credits/Cards processing are recurring revenue but only formed 7% of the total revenue.
Hi DT,
ReplyDeleteI went to look at its FA due to your post. Looks good in terms of growth and debt ratios ; fast growth is risky itself. If not for the high price-to-book ratio, I might be interested too. Adding on, technology gets obsolete easily which is another risk to consider. Just my take :) but nobody knows if it may go back to sgd$1/share.
Hi Frowns, to me it is not easy to evaluate a software company & most of its assets are intangible assets which is even harder to assess.
ReplyDeleteHowever with its expanding suite of service in insurance solutions & recently clinched contract for 2 Thai financial firms did prove that Silverlake had its leader position in CBS in SE.Asia.
With regards to technology obsoleting ,the executive chairman also founder of the company had his own private entity that do research & development of new technology & if any new technology break through,silver lake has the first rights to use it. The main concern is whether Silverlake can continue to win new clients in CBS & other industries & it is not a easy task to do so .