Equity Analysis /
Pakistan

Systems Ltd: 1HCY22 analyst briefing takeaways

  • SYS revenue growth in 1HCY22 superseded it's historical 5-year 1H revenue CAGR of 47%, by 28ppt YoY to 75%.

  • The company acquired two tech companies (Ndc Tech and Tree House) during the 1HCY22.

  • SYS’s focus will remain on Data, Digital, Cloud Emerging technologies and beyond for future growth.

Intermarket Securities
1 September 2022

After posting solid earnings growth in 1HCY22, SYS conducted analyst briefing session to reflect on recent quarter’s performance, while providing guidance on the near-term outlook. The company is on a spree of growing both organically and inorganically, while ensuring each of its expansions are worth the money. Initial takeaways from this session warrants an upwards revision in our current investment case. For now, we reflect the key observations discussed in today’s event. Please refer below for details:

Financial performance

  • SYS posted consolidated NPAT of PKR1.76bn in 1QCY22 (EPS: PKR6.34), up 93% YoY and 47% QoQ, taking 1HCY22 NPAT to PKR2.96bn (EPS: PKR10.65).  The company's revenue mix in 1HCY22 comprises of 44%/ 41%/ 15% from North America & Europe/ Middle East/ Pakistan.

  • SYS revenue growth in 1HCY22 superseded it's historical 5-year 1H revenue CAGR of 47%, by 28ppt YoY to 75% to PKR11.5bn. Moreover, net profits of the company have increased by 96% YoY to PKR2.96bn.

  • About 93% of its revenue is recurring and 53% of the revenue comes from top 20 customers. Also, during the quarter active client base has increased to 108 versus 80 in 1HCY21. These are those clients which contribute at least USD100,000 each in revenues. About 22 clients yield USD1.0mn or more in revenues.

  • SYS hired more than 400 new employees in 1H. Apart from this, the company also acquired two tech companies (NdcTech and Tree House) during the 1HCY22.  The company has also expanded its presence in other countries like Saudi Arabia, Singapore, Egypt and South Africa, to increase its customer base and skilled employees pool.

Outlook

  • SYS’s focus will remain on Data, Digital, Cloud Emerging technologies and beyond for future growth. The company foresees massive opportunities in all these services. Among the verticals, apart from existing segments Telco, Retail & CPG, BFS, Technology and BPO, the company has expanded in Healthcare Pharma and others also. Coupled with this, SYS is eyeing to increase penetration in BFS segment post NdcTech acquisition, which specializes in Banking Saas based software, under licensing agreement with Temenos.

  • The management guided that OneLoad (EP Systems) has been doing well in terms of market penetration and so far the company has a network of c.32,500 active retailers in Pakistan. EP Systems presently has an employee strength of 732. OneLoad’s throughput has increased to PKR10.6mn in 1HCY22, from PKR6.9mn in 1HCY21.

  • Commenting on future growth, management mentioned that the current growth momentum is likely to continue in the longer run. This is mainly backed by higher growth coming from all business verticals – asserting that the base of the company remains very small, as compared with the total addressable market

We have a BUY stance on the scrip with a December 2022 TP of PKR490/sh, but we look to revisit our estimates given the current and future hyper growth trajectory.