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Broker's take: CGS-CIMB upgrades Silverlake to 'add', expects earnings recovery

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BrokersTake: CGS-CIMB upgrades Silverlake to 'add', expects earnings recovery

The cautious business environment caused by the coronavirus outbreak has taken a toll on the company's financial performance, with net profit falling by 12 per cent on the year to RM59.1 million for its fourth quarter ended June 30, 2020.

The company's margins were also compressed by an unfavourable revenue mix and a higher effective tax rate after a Malaysian subsidiary's pioneer status expired, CGS-CIMB noted. Silverlake had said that its full-year gross profit margin shrank due to lower contribution from higher-margin business segments such as software licensing and software project services.

"With a strong order backlog and lockdown measures easing globally, we expect Silverlake's project-related revenue to stage a strong rebound in FY21 ," Mr Ong wrote.CGS-CIMB forecast Silverlake's top line to increase by 9.2 per cent for FY21.

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