System Limited (SL), is all set to be listed at the Karachi Stock Exchange, offering 13 million shares at a price band of Rs 25/share to Rs 35/share. System Limited will be the fourth IT company to be publicly listed after The Resource Group TRG, Netsol Technologies and Avanceon. Although performance of all above listed performance companies remains topsy turvy due to IT industry has established in late 1980’s.

The Company

System Limited is incorporated in 1977 providing computing strategies and solutions to Government and Private Organization. Company has completed more than 600 projects in the US, Pakistan, Middle East and Africa. Company serves their client to improve their productivity by guaranteeing their core business to work faster and cheaper. Company segments include Business Process Outsourcing, Consulting Services, Software & IT Services and Outsourcing Service. System Limited has provided various solutions in different companies like Engro Corporation, Telenor, Adamjee Insurance, Faysal Bank, JDW Group, Tameer Bank, Fatima Group and Board of Revenue Sindh, Punjab & KP.

Book Building – overwhelming response expected

The Company is issuing 13 million ordinary shares (12.98% of total paid-up-capital) in a price band of Rs 25/share to Rs 35/share. The first phase of 75% of the total offering (9.75 million shares) will be offered to Institutional Investors and High Net Worth Individuals through book-building that would be taken place from December 4, 2014. Whereas in second phase, remaining 25% (3.25 million shares) will be offered to the general public at the Strike Price which will be determined through the Book Building Process.

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Growth in earnings expected in CY15
Despite inclusion of 13 million shares which would dilute earnings, we expect company to post decent growth of 33% in CY15 as profit after taxation to clock in at Rs 533 million (EPS:
Rs 5.32) in CY15 against Rs 402 million (EPS: Rs 4.01) anticipated in CY14 which would be flat earnings. We expect corporate demand to improve from banks and telecom sector as this industry would go for further automation.

Recommendation
As System Limited business model likely to promising, we estimate Dec’ 15 target price of Rs 42/share providing upside potential of 68% and 20% from price of Rs 25/share and Rs 35/share respectively. We have applied PE multiple of 7.8x to calculate target price against
KSE multiple of 8.4x

Company Introduction

Systems Limited is a global leader of next-generation IT services and BPO solutions. Ever since its inception in 1977, the company has evolved and taken center stage in information and technology by providing computing strategies and solutions to Government and Private Organizations.

With three decades of experience and IT evolution, we have accomplished above 600 projects completed in the US, Pakistan, Middle East and Africa. We excel at delivering business solutions to a huge list of clients from diverse industries that also includes several names from the Fortune 500. Our offshore facilities established in the US, UAE, UK, and Pakistan, comprise of over 2,500 customer-focused employees providing a great customer experience.

What makes us distinctive is our ability to assist clients and meet challenges. We serve them to enrich their productivity by guaranteeing that their core business functions work faster, cheaper and better. Using our ability to conceptualize, we design, innovate, and implement with the latest and advanced tech proficiencies, hence enabling our clients to metamorphose their legacy models and take their business to the next level.

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Internationally, Systems Limited has proven itself as a key player in the critical market segments covering United States, Middle East, South East Asia and Europe, and continues to provide solutions & products to a budding list of corporate clients and public sector organizations.

Our work philosophy is simple – deliver quality & value by generating flexible software solutions within a fun, disciplined, and a receptive work environment that promotes unity and fortify the strength of the company.

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