EARNINGS from Scicom (MSC) Bhd’s Education Malaysia Global Services (EMGS) segment see a bleak outlook, due to the longer than expected travel restrictions, says MIDF Research.
“We gather that the earnings from the group’s EMGS segment continue to weaken as all
corporate training continues to be deferred, as foreign students are unable to apply to study in Malaysia as an impact of Covid-19.”
“Taking into consideration the longer-than-expected travel restrictions coupled with the current economic deceleration, we continue to posit a bleak outlook on the segment in the near-term,” said MIDF.
This follows Scicom posting a core net income of RM22.1 mil for its 2020 financial year, which came in within expectations. This, according to MIDF, was backed by Scicom’s revenue increasing 12.5% year-on-year (yoy) to RM181.3 mil.
“We gather that the higher income was derived from higher contributions from several of its existing and newly secured business process outsourcing (BPO) clients, making up nearly 99% of the group’s total revenues,” said the research house.
The online consumer product vertical within the group’s BPO activities will continue to be a focal point as well, according to MIDF, which will compensate for the weakening financial performance of the other segments in Scicom.
“Although we note a sharp decline in billings from the group’s BPO clients within the tourism, leisure and the education verticals, this decline, however, was compensated by higher contributions from business activities with its BPO clients within the online consumer product vertical.”
“We gather that certain projects within this e-commerce segment have requested for additional headcount to manage the increase in transaction volume,” said MIDF.
The research house maintained a neutral call on Scicom, with a lower target price of 95 sen from a previous RM1.05.
“Note that since the implementation of the recovery movement control order (RMCO) in June, the group has been recording a gradual increase in transactional volume for the BPO’s existing and newly-secured clients.”
“As the BPO segment comprises nearly 99% of the group’s total revenues, we foresee the group’s future earnings to continue to be supported by BPO business activities, especially by the e-commerce division, in the intermediate term,” said MIDF.
At the end of the trading day, Scicom’s shares were last done at 91 sen, down half a sen, with 2.4 million shares traded. – Sep 1, 2020
