Hopes crushed: Silverlake Axis loses largest deal after banks terminate mega-merger

Potential orderbook could decrease by $37m.

The CIMB-RHB-MBSB mega-merger has been officially called off, leaving Silverlake Axis frustrated.

According to a report by OSK-DMG, Silverlake has missed out on its major post merger integration deal, leading to a slowdown in earnings growth, especially from 2H16 onwards.

OSK-DMG says that with the deal off, potential orderbook could decrease by ~MYR100m ($37m) and revenue from 2H16 onwards may be negatively impacted by lower topline growth.

However, OSK-DMG expects Silverlake to resume talks with RHB on its core banking upgrade project.

As previously highlighted, execution risks still persist despite Silverlake being able to maintain a good track record thus far. However, analysts do feel that it might face potential execution risks in the North Asia segment, which will be key to the company’s future growth.

Here’s more from OSK-DMG:

Uncertainty lurks regarding Silverlake’s orderbook as it has not announced new contract wins for quite some time despite management stating previously that the company has 15 months of contract backlogs to tap into.

In addition, the loss of this post merger integration project ought to deliver a significant blow to its potential orderbook. However, we do expect Silverlake to resume discussions with RHB on its core banking upgrade project, which ought to cushion the fall.