Tuesday, June 21, 2016

A short write up on Silverlake-axis

(Vested interest)

Silverlake is interesting, in my opinion. There are plenty of blog posts regarding the numbers, its FCF etc, so I will not dwell into it. When razor99 wrote a short seller report, it cause the stock to lose some 80% of the value, by suggesting mainly that the numbers are not real and prop up by complicated IPTs. The Deloitte Singapore report while suggesting some better clarity and transparency could be handed with regards it its IPTs, nonethelss give it a clear bill of heath and suggest that the numbers are good. You can read the report here.

What then ills this company, that it cannot even reover to half of its glory. As I read through the ARs and look that the various issues, I found the followings:

1) Results is not longer growing, since its acquisition of Sungard Ambit.
2) It could be over-valued when it is hot, and people are just coming to reality with it.
3) It report its earnings in Ringits and ringits is facing headwinds.
4) GIT, an company in which it has an 20% stake and has intention to sell 8 million shares, has been suspended since March.

I found 4) to be most intriguing and there is plenty of updates from this webpage 

GIT is suspended pending restructring, while it is still suspended, the details of the transaction is already out. It is buying another company for 300 mio, of which 21.8% is paid in cash, and 78.2%  in shares placement. There will also be another tranch of placemnet  to 5 investors for 280 mio cash. Part of the cash will be used to fund the acquisition but the bulk of it will be for expansion plans.

So what is the price paid?

序 号 转让方 持有标的公司 股权比例 股份对价金额 (万元) 股份发行数量 (股) 现金支付 (万元) 1 北京睿韬科技有限 责任公司 60% 14,076 2,765,422 3,924 2 宁波镇海翔易融联 投资管理合伙企业 (有限合伙) 40% 9,384 1,843,614 2,616 合计 100% 23,460 4,609,036 6,540

10% discount to its 20days average price prior to its suspension, and that valued the GIT shares at 50.9 CNY. The new investors pledge not to dispose the shares within the next 36 months.

In terms of PE, the deal is crab, but A-shares seem to have crabby over-valuation, including that of GIT itself. But there is profits guaranteed clause:

"宁波镇海翔易融联投资管理合伙企业(有限合伙)及北京睿韬科 技有限责任公司(“补偿义务人”)承诺,上海睿民在 2016 年度、2017 年度及 2018 年度合并报表口径下归属于母公司所有者的扣除非经常 性损益后的净利润分别不低于 2,000 万元、2,600 万元和 3,380 万元。"

20 Mio, 26 mio and 33.8 mio for year 2016-2018. Not too bad a deal, if you ask me. Because GIT annual NP is CNY 32,948,983.24. GIT will grow more than the dilution of 15%. And the discount of 15% versus 10% dilution do not seem excessive too.  

The website posted an research report calling for a "buy" after the acquistion with a target price of 87CNY, what caught my attention is not the price target but the PE. 150 X (what the F+*&)


2016 Q1result of the target company is 4,132,354.09. But that is because the big expense research fees which amount to 16 mio for the whole of 2015 is missing. I wonder why they are confident of profit guarantee (With an compensation clause, not say say only) of 20 mio? It is because there is snergy in research expenses? Or that the 16 mio in 2015 is one-off? I did not dig further.

So, if there is no monkey business at GIT and assume 8 million shares sold at  50CNY sold, we are looking at 80 mio SIngdollars. 

GIT issue does not seem to be an issue to me.

How about point 1)? That it is no longer a growing company. Only time will tell if Ambit is a good deal, by reading the annual reports of the customers of silverlake, OCBC, RHB, and CIMB, all three mentioned investing in technology to enhance customers' experince, increase productivity, etc, there is no mention of cost cutting in this area. I think the sales team headcount would be under the chopping board first, OCBC mention the integration of Wing Hang system into OCBC, so I believe the process is still on going and the recurring income should be stable or growing. 

I could be well wrong about all this. I am an armchair investor, as for currency weakness, that is one I am willing to bear as I do not think Ringgit is going to be much lower than 3:1 currently. 

So, what do you think?


  1. Vested too. My take is that most retail investor are still doubting the Accounts and if mgmt step out to clarify this with specific details, it might clear the sky for them to rocket!

    1. Hi Romento,

      I dun think management can be any more specific than the report. I spend hours reading that report over a few days.

      But one good thing is silverlake pay dividends, the good results is followed by "show u the money" in the longer run, money will talk

      But that is assuming the operating moat is still there and growing. But at such price, I do think there is MOS

  2. As they always say, they let their result (financial numbers) speaks for itself.
    I guess it's about how the Ambit gambit turns out to be.
    The ambit acquisition is reflecting in the lower margin.

    My take is that they have expected the worst case for ambit and hence the small amount of money paid for the acquisition.
    But, in my opinion, the difficulty in turning around the ambit would be far more difficult. Let's hope the new contracts (RHB, Wing Hang etc) coming in sooner (if there's any).

    1. Hmm...risk

      Ambit seem too cheap a deal for me too. Time will tell if ambit is smelly armbit lol

  3. ha ha ha! don't say.
    The guy is master in game theory.
    He picks up when others threw out that armpit while holding their noses!

    My surprise is actually the Finzsoft, which I expect to perform but so far so so.

    1. Hi Risk,

      Thanks! What do you think is the problem with Finzsoft?

  4. Do you need to increase your credit score?
    Do you intend to upgrade your school grade?
    Do you want to hack your cheating spouse Email, whatsapp, Facebook, instagram or any social network?
    Do you need any information concerning any database.
    Do you need to retrieve deleted files?
    Do you need to clear your criminal records or DMV?
    Do you want to remove any site or link from any blog?
    you should contact this hacker, he is reliable and good at the hack jobs..
    contact : cybergoldenhacker at gmail dot com

  5. This link on insurance was very useful for my search. To get best insurance plan click here to know more :- best insurance savings plan