SGX Stock Targets :: Your One Stop Analyst Reports Blog

Incorporated in 1980, Singapore Computer Systems (SCS) is a leading information communications technology (ICT) serviceprovider in Asia. The Group operates in seven countries regionally, with the bulk of revenue coming from Indonesia and Singapore. Following two years of relatively huge losses in FY03 and FY05, SCS is taking steps to improve its business model and operational efficiency. A successful turnaround would allow the company to benefit from the steady and sustained growth expected of the local and regional ICT markets in the coming years.

With a new management at the helm, SCS is showing promise by returning to profitability and achieving its sixth consecutive quarter of profitability in 1Q07. Year on year, gross margins improved from 11.4% in 1Q06 to 15.3% in 1Q07. At the close of 1Q07, SCS’ order books stood at S$299.3m, 45% of which will be recognised in FY07. At S$0.92, SCS is currently trading at 19.3x FY06 earnings. This is roughly inline with its peers average PER of 19.9. Given its improved business performance in 1Q07 and the positive outlook for the rest of FY07, we are estimating SCS’ earnings to grow 13.2% for the year. This would translate into an FY07 EPS estimate of S$0.054. As we are expecting SCS to trade at a forward PER close to its industry average of 16.3x forward earnings, we derive a target price of S$0.88.