Monday April 30, 2012

Century Software expects boost to earnings


PETALING JAYA: Century Software Holdings Bhd (Censof) is expecting an earnings boost after it bagged two government information technology (IT) contracts.

The contracts from the Social Security Organisation (Perkeso) and the Inland Revenue Board (IRB), although totalling RM39.1mil and not large by nature, are expected to be sufficient to lift the earnings of the ACE Market company.

Censof group managing director Datuk Samsul Husin (pic) is confident of doubling the company's earnings for its year ended Dec 31, 2012. He said recurring income now contributed 20% of Censof's topline, and this had been increasing every year whenever the company wins new contracts.

Censof group managing director Datuk Samsul Husin

For the year ended Dec 31, 2011, Ceosof's net profit was down 27.22% to RM9.31mil on the back of a 36.61% increase in revenue to RM43.34mil. The lower profits were due to lower maintenance work from its Financial Management Software System (FMSS) division. Currently, the FMSS division contributes almost 90% to its profits.

Censof has RM8.85mil in cash and almost no debt on its balance sheet.

The new contracts will bring Censof's order book to RM74.1mil, which will keep the company busy until June 2013.

“Our Perkeso contract will begin on Friday and will last for some 16 months. This contract requires customisation and has many of its own pecularities. Perkeso liked our proof of concept for the development model, and we were also a lot cheaper than some of the multinationals,” said Samsul.

An OSK analyst has an earnings forecast for Censof's year ended Dec 31, 2012 of RM20.3mil, based on its existing contracts and full-year contributions from its newly acquired Indonesian Investment Management Solution arm, PT Praisindo Teknologi, which has gross margins of approximately 70%.

For the quarter to Dec 31, 2011, Censof completed the acquisition of a 60% stake in PT Praisindo on Nov 14, 2011, for a US$1.25mil (RM3.75mil).

PT Praisindo is now providing services to 22 banks, including PT Mandiri and BNP Paribas.

“We are confident of maintaining those high margins, as the overall cost for the solution provided is already quite low. While PT Praisindo's contribution to bottomline is approximately 10%, we see this increasing as many of the existing clients are upgrading their solutions and the maintainance work is increasing,” said Samsul.

According to the OSK analyst, the company has identified another RM36.5mil worth of new projects it can tap.

Shamsul added that apart from the RM36.5mil contracts it was bidding for, it also recently bid for another contract for the provision of Goods and Services Tax software services. There are four competitors in this bidding process.

Last June, Censof was awarded the RM22.5mil Outcome-Based Budgeting project by the Finance Ministry. To date, the planning module of the system had gone live to all ministries.

At the same time, Censof announced that it has received two Letters of Award from the IRB for two contracts. Both contracts, with a total combined value of RM5.6mil , will require Censof to upgrade and maintain the Standard Accounting System for Government Agencies Century Financials accounting system.

“The improvement in Censof's earnings from these new contracts will start to be seen from our second quarter results onwards,” said Samsul.

Censof is an investment holding company which, provides and develops business solutions, as well as provides high value and ground-breaking online payment solutions.

As part of the internal restructuring scheme to prepare Censof, the company completed the acquisition of Century Software (M) Sdn Bhd (CSM) and T-Melmax Sdn Bhd in December 2010.

Censof's core business is essentially undertaken via CSM, which is principally involved in the design, development, implementation and marketing of the FMSS.

Its core product, known as Century Financials has evolved into a comprehensive FMSS with the ability to process and manage the full spectrum of an organisations' financial requirements with over 43 accounting and related modules.

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