There were no surprises in Efficient’s stable and resilient data and document processing outsourcing business in the latest quarter. The company is on track to repeat the revenue and earnings track record for the ninth consecutive year.
Business rising steadily. For 3QFY09, revenue and earnings increased by 19% and 9% respectively. While revenue increased by 14% compared to the 9% earnings growth in the 9MFY09, the increase in revenue was mainly due to higher data printing volume from existing and new customers. The bottom-line increased at a slower rate due to the higher operating and building costs incurred. On a q-o-q basis, despite revenue rising a marginal 1%, earnings fell 13% mainly due to lower margin of the software application development
services rendered in 3QFY09.
Net cash. As at 30 September 2009, Efficient had RM20m net cash and another RM8m in short-term investments. The company’s net cash is expected to continue rising steadily going forward due to its high free cash flow business model. Other balance sheet items were healthy.
Management guidance. According to management and barring unforeseen circumstances, the company expects continuous earnings growth from data and document processing segment and software development segment with higher revenue and appropriate cost control measures.
New business updates. Efficient’s data and document printing business continued to grow steadily, simply riding on the business volume of major commercial banks, insurance companies and telecommunication companies in Malaysia. There are some new business developments which we think unlikely to become significant in the near future. Firstly, Efficient is trying to secure the remaining three commercial banks as customers but we think this is very unlikely to materialize anytime soon as other third party service providers are currently engaging with the banks. Another development is that the company will soon be spending approximately RM1m to set up a smaller scale data and document processing centre in Johor to target potential customers in Singapore. Efficient is currently in talks with a number of existing customers which also have braches in Singapore. Anyhow, we think this business is unlikely to contribute significantly to the company in the next two years.
