Scicom (MSC) Berhad
is engaged in the provision of customer contact center services within
the business process outsourcing (BPO) space. It provides outsourcing
services comprising BPO services, which offer multi-lingual,
multi-channel customer care, technical support help desk, consultative
sales and associated fulfillment, and education, which includes
educational and industrial training services primarily focused on
customer care in the service industry.
It provides services to clients in various areas, such as Malaysia,
Singapore, Philippines, United Kingdom, Sri Lanka, Indonesia, Japan and
China.
SCICOM (0099) - A Gem in Digital Workforce at 93 Sen with further upside range of 124 to 155.
At 93 Sen it is trading at PE 15 using FY 2020 EPS 6.2 (FY 2019 EPS was 5.69) with a dividend yield 5.38%.
Scicom has been paying qtrly dividend.
With consistent delivery of profit and payment of quarterly dividend
with dividend yield of 5.38%, it warrant a PE 20 to 25. With such PE
based on FY 2020 EPS of 6.20. Its valuation would range from 124 to 155.
I am very positive with Scicom. It is lagging behind its PEERS like Opensys,Krono, N2N, and Rexit.
Peers-to-Peers comparisons as below:
- Opensys at 102 Sen is trading at PE26.42 based on 4 rolling qtr EPS of 3.82 Sen. Dividend Yield 1.47%
- N2N at 68.5 Sen is trading at PE22.91 based on 4 rolling qtr EPS of 2.99 Sen. Dividend Yield 2.92%
- Krono at 55.5 Sen is trading at PE23.4 based on 4 rolling qtr EPS of 2.37 Sen (Adjusting back for PPE impairment of RM11.6 mil). Dividend Yield Nil%
- Rexit at 67 is trading at PE 13.32 based on 4 rolling qtr EPS of 5.03 Sen . Dividend Yield 4.48%
I am giving Scicom a valuation of 124 to 155 based on PE 20 to 25 using FY 2020 30 June EPS of 6.2 Sen.
Scicom's Business Prospect:-
1) Business Proess Outsource (BPO) -
- As one of International certified BPO player, Scicom BPO provides digital enhanced support solutions that businesses need to meet and exceed expectation. The Co Business Process Outsourcing (BPO)’s suite of services including integrated solutions in Customer Lifecycle Management, Digital/ E-Commerce Solutions and EGovernment (Gov-Tech) Solutions.
- Revenue BPO The Group’s BPO business principally comprises services provided to clients on long term contracts. The Group also secures clients that requires ad-hoc short term services. Despite the impact from the MCO and travel ban due to Covid-19 that came into effect at the end of the 3rd financial quarter of the current financial year under review, the Group’s BPO business has registered a growth in revenue approximating RM20.52 million as compared to the preceding financial year,
- The growth in revenue is primarily contributed by organic growth for existing clients and also contribution from newly secured clients amounted to RM11.43 million and RM9.09 million, respectively. Education The revenue from the Group’s Education business decreased due mainly to lower English Language Testing/ Assessments and corporate training
- Strong financial with Nil borrowings other than lease liabilities with cash of RM29 mil and consistently paying dividend. Cashflow from operation for FY 2020 is RM26.1 mil (FY 2019 22.2 mil) Co balance sheet can withstand a financial crisis.
- The BPO industry focussing on customer engagement has evolved from offering low complexity voice calls to providing a broad range of digital channels (web chat, social media care, mobile app) for customer care. Digital customer service has become a priority for businesses.
- According to a Research and Markets study, the Customer Care BPO market is valued at USD18 billion in 2019 and will register a 6.2% compound annual growth rate (CAGR) over the next five years.
- Scicom now offers an array of digital services in the areas of Robotic Process Automation (RPA) and Artificial Intelligence (AI). .The future tech in handling BPO business.
So, What is RPA ??
- Robotic process automation (RPA) is the use of software with artificial intelligence (AI) and machine learning capabilities to handle high-volume, repeatable tasks that previously required humans to perform. These tasks can include queries, calculations and maintenance of records and transactions.
- RPA Technology consists of software robots (bots) that can mimic a human worker. RPA bots can log into applications, enter data, calculate and complete tasks and then log out. Currently, practitioners divide RPA technologies into three broad categories: probots, knowbots and chatbots.. https://searchcio.techtarget.com/definition/RPA
- Revenue BPO The Group’s BPO business principally comprises services provided to clients on long term contracts. The Group also secures clients that requires ad-hoc short term services.
- Despite the impact from the MCO and travel ban due to Covid-19 that came into effect at the end of the 3rd financial quarter of the current financial year under review, the Group’s BPO business has registered a growth in revenue approximating RM20.52 million as compared to the preceding financial year.
- China in Focus - China’s Customer care BPO accounts for 10% of the global market and is likely to be thefastest growing country in the next 10 years as outsourcing becomes increasingly popular with domestic companies. Scicom has a strong track record for serving China’s leading companies in the consumer electronics market and have set targets to increase our share of seats with existing clients and to win new deals in the growing outsourcing market in China. Customer service continues to be a critical success factor in the competitive China market and acquire, service and retain their customers.
2) E-Gov Solution
- In July 2020, Scicom is partnering with Micolink Solution Berhad to collectively bid for e-government solution jobs.
The core business of the joint venture (JV) company is the provision of e-government solutions and services which include the design, development, implementation, operation and maintenance of software and the provision of associated support service
3) Integrated Covid-19 Testing Platform
- In May 2020, Scicom (MSC) Bhd has teamed up with Qualitas Medical Group to launch Covid-19-MY-Screening, which has been touted as Malaysia's first integrated Covid-19 testing platform to help both employers and employees seamlessly manage all Covid-19 screening requirements.
The system allows all Malaysian employers, along with both domestic and foreign employees to register for Covid-19 screenings, schedule test appointments and track test results prior to resuming their work duties.
4) National Integrated Imigration System (NIIS)
- According to Focus Malaysia dated July 27, 2020, Scicom is one of the 6 frontrunners of NIIS projects worth RM1.2b, a possible largest public project year 2020 so far.
Scicom's Prospects for financial year 2021
- Strong financial with Nil borrowings other than lease liabilities with cash of RM29 mil and consistently paying dividend. Cashflow from operation for FY 2020 is RM26.1 mil (FY 2019 22.2 mil) Co balance sheet can withstand a financial crisis.
- The growth in revenue is primarily contributed by organic growth for existing clients and also contribution from newly secured clients amounted to RM11.43 million and RM9.09 million, respectively. Education The revenue from the Group’s Education business decreased due mainly to lower English Language Testing/ Assessments and corporate training.
- With the Government’s success in controlling the spread of the Covid-19 pandemic in Malaysia and the subsequent lifting of the MCO and travel ban in June 2020, the Group is already experiencing a gradual increase in transactional volume for the BPO’s clients and expects volume to return to the pre-Covid-19 level by the 2nd quarter of the financial year 2021.
- Certain existing clients for BPO business have already planned for an increase in headcount in their operations forecast starting from the 2nd quarter of thefinancial year 2021. The Group has also intensified its business development efforts during the MCO period and is optimistic in converting some of the prospects in the pipeline by this financial year 2021.
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