Equity Analysis /
Pakistan

Systems Ltd: 9MCY22 Analyst Briefing Takeaways

  • SYS’ revenue growth in 9MCY22 was a steller 91% YoY (to PKR20.1bn),

  • SYS hired more than 750 new employees in 9M (this includes NdcTech and TH employees also).

  • The management mentioned that the current growth momentum is likely to persist.

Intermarket Securities
1 November 2022

SYS had an analyst briefing today to discuss recent financial performance and outlook, while providing guidance on the near-term outlook. The management highlighted that they will continue to focus on organic and inorganic growth, exemplified by the recent acquisition of NdcTech and TreeHouse for PKR7.3bn and PKR336mn respectively.

Financial Performance

  • SYS posted consolidated NPAT of PKR2.2bn in 3QCY22 (EPS: PKR7.41), more than double YoY and up 22% QoQ, taking 9MCY22 NPAT to PKR5.1bn (EPS: PKR17.63).  The company's revenue mix in 9MCY22 is split 42%/ 39%/ 18% between Middle East/ North America & Europe/ Pakistan.

  • SYS’ revenue growth in 9MCY22 was a steller 91% YoY (to PKR20.1bn), much higher than previous 5yr revenue CAGR of 53%. Moreover, net profits of the company have increased by 103% YoY to PKR5.1bn.

  • Approximately 94% of revenue is recurring and 47% of the revenue is being derived from top 20 customers. During the quarter, the active client base increased to 161 versus 109 in 9MCY21. These clients contribute at least US$100,000 each in revenues. About 22 clients yield US$1.0mn or more in revenues.

  • SYS hired more than 750 new employees in 9M (this includes NdcTech and TH employees also). The revenue contribution from both companies was PKR895mn during the quarter (post consolidation). SYS has also expanded its presence in other geographies and now is present in 13 countries in total.

Outlook

  • SYS’ focus will remain on Data, Digital and Cloud Emerging technologies for future growth. The company foresees massive opportunities in all these services. The BFS segment should see accelerated growth post acquisition of NdcTech (which will enable SYS to provide end to end service). NdcTech specializes in Banking Saas based software, under a licensing agreement with Temenos.

  • Commenting on future prospect, management mentioned that the current growth momentum is likely to persist. This is primarily backed by higher growth stemming from all business verticals – management asserts that the base of the company is still quite small, compared to the total addressable market. Saudi Arabia in particular offers massive growth opportunity for the tech sector and should help SYS to acquire new clients and grow rapidly.

We have a BUY stance on the scrip with a December 2023 TP of PKR635/sh, offering an upside of 43% from last close.