Censof Holdings - Awarded a training project by PSMB

News  KnowledgeCom S/B, an 80%-owned subsidiary of CENSOF primarily engaged in IT e-training and management courses was awarded a new project by Kementerian Sumber Manusia of Pembangunan Sumber Manusia Berhad (PSMB) for a staff training course namely Specialised Training and Advanced Recruitment “STAR” worth RM1.05m, commencing from Feb-13 until Dec-13.

Comments  According to management, the project is merely a staff training project with an estimated gross margin of around 70%, implying effective contribution of around RM600k of gross profit a year to the FY13 earnings of the group.

 We believe the awarded contract of RM1.05m (the 2^nd one thus far in FY13) is considered a minor contract and it fell well within our assumption of a total of RM13.2m worth of contracts expected to be awarded in 1Q13.

 We are positive on the announcement as CENSOF has again expanded its clientele base to another government agency after just being awarded a new project worth RM1.7m by Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN) last week.

 CENSOF is currently engaged with a few government agencies in the country e.g. PTPTN, PERKESO, MoF, KWAP and LHDN.

Outlook  We believe that CENSOF’s long term outlook remains intact, underpinned by: i) its active tendering of contracts for both the Indonesian and Malaysian markets for its FMSS segment; ii) continued projects/contracts flow from the various government agencies where it is now serving over 27 ministries and 80 government agencies in the country, and iii) the possible implementation of GST/VAT after the looming upcoming General Election.

Forecast  Our FY13E-14E earnings are unchanged. Nevertheless, we may lower our FY13 and FY14 earnings forecast should the company fails to meet our annual order book forecast of RM64.4m and RM24.0m (including potential GST contracts) respectively. YTD, the group secured total new contracts of RM2.75m vs. our RM13.2m order book forecast in 1Q13.

Rating   Maintain OUTPERFORM

Valuation  Maintaining our TP of RM0.61 based on an unchanged targeted FY13 PER level of 12.2x over FY13 EPS of 5.0 sen.

Risks  Failure to secure more projects.

 Delay in projects revenue recognition.

Source: Kenanga