A $110m windfall is on the horizon.
When it comes to Silverlake Axis (Silverlake), there’s more than what meets the eye. Analysts assert that the market is significantly undervaluing Silverlake, given that it is a software company handling core banking systems for a number of big players in the ASEAN banking scene.
According to a report by DBS, the moratorium period relating to Silverlake’s 20% stake in Global Infotech (GIT) has ended. Being one of GIT’s substantial shareholders, GIT had advised Silverlake that it may sell up to 8m of its shares within the six-month period beginning 24 June 2016.
As a result, DBS anticipates roughly $110m to be raised from these share sales, translating to about 4.2 S cents special dividend per share to equity holders.
Moreover, DBS asserts that Silverlake has a solid balance sheet with a net cash position, and pays quarterly annualised dividends of about 5%.
On top of the end-FY16 dividends from operations, Silverlake’s end-FY16 yield can shoot up to 12.6%.
DBS is bullish on Silverlake, as the business is in talks with several Malaysian banks on the possibility of implementing its software to replace the banks’ current core banking systems. Each contract is seen to be worth MYR150m-200m, and DBS thinks it is probable that Silverlake locks down one by the end of 2016.
Given the current low valuations for the company, coupled with potential catalysts like its special dividends and new contract wins, the current share price weakness reflects an ideal buying opportunity.
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