News  CENSOF was awarded a contract from Lembaga Kemajuan Ikan Malaysia (“LKIM”), the “Perkhidmatan Penyelenggaraan Sistem Saga Century” worth approximately RM1.01m with project duration of three years from 1-Oct-13 to 30-Sep-16.

 Meanwhile, CENSOF has fixed the issue price for the issuance of 10m new ordinary shares of RM0.10 each at RM0.4650, representing up to approximately 2.82% of the issued and paid-up share capital of CENSOF as at 19 September 2013, to third party investors pursuant to the first tranche of the Private Placement.

Comments  Although the contract sum of RM1.01m is small falls and within our assumption of a total RM24.0m worth of contract expected to be awarded in 3Q13, it signifies CENSOF’s continuing expansion into the government sector.

 Based on historical trend, we reckon the gross margin of the maintenance contract is around 70%, implying effective contribution of around RM59k and RM236k of gross profit in FY13E and FY14E to the group, respectively.

 We are positive on the announcement as CENSOF continues to engage with an enlarged government clientele base. The group is currently involved with a few government agencies in the country such as PTPTN, PERKESO, MoF, KWAP and LHDN with total outstanding order book of RM46.34m.

 Meanwhile, based on the issuance price of RM0.465/share, the first tranche of the private placement will raise RM4.65m. Note that we have previously factored in a potential cash raised of RM19.35m from total private placement exercise at issuance price of average RM0.50/share (of total 38.7m shares) in our FY14 forecast, which would increase the fully-diluted number of shares to 391.5m (from 352.8m previously). We have adjusted our balance sheet items accordingly.

Outlook  We believe CENSOF’s long-term outlook remains encouraging, underpinned by (i) potential catalyst from GST development in the upcoming 2014 budget and (ii) consistent projects/contracts flows from various government agencies.

Forecast  Our FY13E-FY14E earnings remain unchanged.

Rating   Maintain OUTPERFORM

Valuation  We maintain our TP of RM0.610 based on unchanged targeted FY14 PER level of 15.5x.

Risks to Our Call  Delay in projects revenue recognition.

 Lower-than-expected contract wins.

Source: Kenanga