Skip to main content

Hitachi

Hitachi eBworx

May 14, 2007

Increased Demand to Boost eBworx Earnings

Petaling Jaya, 14 May 2007 - eBworx Bhd expects to boost its earnings with increased demand for its products and services by Asian banks pressured to meet the Basel II requirements by 2010.

The implementation of Basel II is expected to drive banks to further automate their processes with banking software offered by vendors such as eBworx.

Central banks in this region have mandated banks to be Basel II compliant, which means the banks’ software must generate quality credit data, enforce credit policies through automation and manage operation risks through tighter controls of loan approvals.

Hwang-DBS Vickers said in a report that in order for banks to remain competitive and relevant, banking services were increasingly shifting to electronic form to cut cost and cater to online customer needs.

It is estimating the banking software market in Malaysia to be in excess of RM600mil per year – assuming that a local bank spends an average of RM100mil per year on its IT system upgrades, with two-thirds allocated to software and maintenance.

The research house, which has a “buy” call on eBworx, expects the company’s earnings to jump 93% and 34% in financial years (FY) ending Dec 31, 2007 and 2008 respectively, driven by Basel II requirements, sales of higher margin products and cost controls.

It noted that eBworx was expected to generate more than RM10mil in sales per quarter or a total of RM43mil this year, up 29% from FY2006.

“This is driven by increasing IT spending by banks, stronger track record through rising number of references, repeat orders and new product launches,” it said.

Hwang-DBS said this year’s revenue would also be boosted by a full year contribution from TradeSpring Suite, a trade finance solution launched in late 2006.

“We are projecting a further 30% and 20% revenue growth for FY2008 and FY2009 respectively,” it added.

It also said the risks of slowing IT spending by banks due to slower economic growth would not greatly impact eBworx as banks were more willing to invest in such solutions to help them generate more sales and lower costs.

Hwang-DBS said eBworx has since shifted its focus towards higher value added products that yielded higher margins from previous efforts in 2004 and 2005, which resulted in lower profits and increased costs.

Source: Adopted from The Star