>ASM TECHNOLOGIES: Continue to Accelerate

■ Company Description
A SM Technologies, established in 1992, is a pioneer in providing world-class consulting services in enterprise solutions for the Packaged ERP products and in enterprise product development for SMB segment and in technology solutions covering embedded systems and system software to its global clientele. ASM has development centres in Bangalore (India), Singapore, Chicago, Toledo and Tampa (USA), and London (UK). Advanced Synergic Pte Ltd, Singapore, Pinnacle Talent Inc, USA, ESR Associates Inc, USA and Abacus Business Solutions Inc, USA are subsidiaries.


■ Industry Verticals
Manufacturing, Oil & Gas, Consumer Electronics, Growth Industries, Telecom, Public Utilities & Retail


■ Services

• Enterprise Applications -- SAP, Oracle Applications, PeopleSoft & J D Edwards, Microsoft Dynamics, Business Process Management, Internet Applications, Outsourced Product Development, White Papers
• Technology Solutions -- System Software, Embedded Systems, Network & Telecom, Engineering Services, Outsourced Product Development

■ Global presence
ASM has worldwide' Global presence with offices in India, Singapore, USA (Chicago, Toledo and Tampa), Japan & UK ' Focus on enterprise applications and technology solutions. It has development centres in India (Bangalore), Singapore, and USA (Chicago). During FY11-12, ASMTL explored the possibility of setting up operations in LATAM (Latin America) Region.


■ Acquisition
During FY11, ASMTL acquired 100% of US-based Abacus Business Solutions, Inc., in an all cash deal through its wholly owned subsidiary, Advanced Synergic pte Ltd, Singapore. Abacus has been in the business for more than a decade assisting large corporations/Fortune 500 firms with Enterprise Applications, Oracle Applications, Oracle Tools and Technology, E- Commerce, Reporting and Data warehousing. The acquisition has afforded ASMTL an opportunity to expand its offerings to a larger ERP & Oracle client base in the US and thus broaden its revenue margins.



■  Q3FY12 & 9MFY12 Results
During Q3FY12, consolidated net profit surged by 86.7% to `2.8 crore (`1.5 crore) on 53.4% higher sales of `38.2 crore (`24.9 crore). OP and NP margin stood at 13.9% and 7.3% as against 9.2% and 6.0% respectively in Q3FY11. (YoY)


EPS for Q3FY12 stood at `5.6.


During 9MFY12, consolidated net profit advanced by 88.3% to `8.1 crore on 46.7% higher sales of `107.0 crore. OP and NP margin stood at 13.4% and 8.1% Vs 9.7% and 5.9% respectively in 9MFY11.


EPS for 9MFY12 stood at `16.2.



■ Blue chip clients
ASMTL offers products to Fortune 500 and Global 2000 elites. ASMTL has 52% of customers from Fortune 500; 78% from Global 2000; Gets 92% of repeat business.


■ Industry specific applications
The need to quickly deploy the ERP Solutions specifically designed for the different industry sectors is gaining momentum. ASMTL is addressing the needs of the Agriculture Based Industry, Process Industry, Consumer Products, Hi-Tech Industry, Clean Power Industry and 


■ Services Industry.
These Industry Specific solutions configured to the Global ERPs will ensure rapid implementation and the clients can reap the benefits of a integrated information system.



■ Enterprise Solutions

• Development of Adaptors for Enterprise Solutions: With diverse applications used by various clients based on their business needs, ASMTL has embarked on Development of Adaptors in partnership with ERP ISVs (Independent Software Vendors), which will seamlessly integrate multiple Enterprise Applications.

• Business Intelligence and Data Warehousing: With large amount of data getting generated across enterprises, the need for providing meaning to the data is imperative. Hence a separate practice is built around market leading tools on the Business Intelligence and Data Warehousing.

• Product Lifecycle Management (PLM): With new product development activities / initiatives across the world gaining high momentum, there is a need to provide scientific ways of managing the Product Lifecycle and the Company is moving towards building expertise and practice in providing PLM solutions tightly integrated with the Enterprise Applications.

■ Cloud Computing

ASMTL is working in new areas, specifically in cloud computing, which will be an inclusive solution program and change the way the Industries / Business communicate with their internal and external stakeholders across multiple geographies. This solution will further be refined for Specialized Industry Verticals.

■ Prospects

The India IT sector has aggregated revenues of USD 88.1 billion in FY2011, with the IT software and services sector (excluding hardware) accounting for USD 76.1 billion of revenues, up 19% (YoY). Within exports, IT Services segment was the fastest growing segment, growing by 22.7 per cent over FY2010, and aggregating export revenues of USD 33.5 billion, accounting for 57% of total exports.

Indian IT service offerings have evolved from application development and maintenance to emerge as full service players providing testing services, infrastructure services, consulting and system integration. There is also a growing customer acceptance of Cloud-based solutions which offer best in class services at reduced capital expenditure.

■ Outlook

With a healthy surge in outsourcing demand and strong deal pipeline, IT revenues are expected to get the biggest boost in coming quarters. With enterprises globally thawing IT budgets to prepare for the future, indication is clear-strong volume momentum will be the flavor of the season and double digit volume growth won't be a surprise to the Indian IT companies, but maintaining the right pace will be a challenge.

Cloud computing is another area, which may drive the IT need of the services industry during the year mainly due to its manageable IT infrastructure and cost effectiveness. The mid market segment remains a major growth avenue for enterprise applications. Globalisation continues to drive global servicing models which ensure India to remain competitive and leverage on its talent pool. Customers are opening up to offerings around cloud computing solutions, SaaS, on demand solutions, etc., which enable service providers to address new customer segments.

■ Valuation & Recommendation

ASMTL will leverage the growth phase in consolidating and growing the organization by offering more services to the existing clients across other geographies and new client acquisitions. This growth phase will also set a platform to have more long term strategic partnerships with the customers moving up the value chain from project mode and center of excellence.

ASMTL’s competitive strengths and with its global delivery model and core competencies consider to address the changing economic scenarios as an opportunity to provide greater value to existing clients and further adding new clients. This spells good business opportunity for ASMTL going forward.

At the CMP of `70, the share is trading at a P/E of 3.1x on FY12E. We maintain BUY with a target of `100 in the medium term.

RISH TRADER