1. Title: Is It a Good Time to Invest In This Stock?
Hi Investors,
Summary
- Issuance of Special Cash Dividends
- Solid Financials with Rapid Growth
- Rising Demand for IT Services in Numerous Sectors
- Business Expansions
1. Syntel Inc (SYNT)
Last Closed Price: $26.49
52 Week Low: $25.98
2. Source: Reuters (Oct 14,2016)
2. What Business Syntel Inc (SYNT) Is In
Syntel is a global provider of digital transformation services to companies. Syntel helps
businesses grow by building efficient information technology and knowledge process
services for firms.
Primary business focus:
Managed Services
Knowledge Process Outsourcing
Emerging Technologies and Innovation Services
Industry Focus:
Banking & Financial Services
Healthcare & Life Sciences
Insurance
Retail, Logistics & Telecom
Manufacturing
3. What Happened to Syntel Ltd (SYNT) Recently?
Special Cash Dividend
Syntel declared a special cash dividend of $15 per share in 12 September 2016, which is
payable to shareholders on October 3, 2016. The special cash dividend will be funded by
U.S. subsidiaries. Syntel also expects to recognize a one-time tax expense of $264M in the
third quarter of 2016.
Due to the one-time issuance of special cash dividend and tax expense, Syntel is revising
its outlook for 2016 Earnings Per Share(EPS), from $2.55 to $2.70 EPS to a loss of $0.60 to
$0.75 EPS.
3. 4. Financial Highlights
Syntel’s financials look impressive with these 4 indicators on the uptrend.
Source: Guru Focus (14th
Oct 2016)
Syntel’s Income Statement shows it’s Revenue, Net Income, EPS all on the uptrend.
4. Syntel’s Assets and Shareholder’s Equity are on the uptrend as well.
Source: Morningstar (14th
Oct 2016)
Free Cash Flow are on the uptrend with only a slight dip from $214M in 2014 to $207M in
2015.
4.1 Key Statistics
Source: Guru Focus (14th
Oct 2016)
ROE at 22.86% and ROA of 18.66% both looking incredibly healthy.
5. Industry Overview
5.1 Market Trends
Increasing Demand for IT Services in Healthcare Sector
5. The healthcare industry is constantly seeking for development in the quality of care while
finding ways to drive cost lower to make healthcare more affordable to the general public.
Syntel focuses on providing a wide range of solutions to the healthcare industry to address
industry trends like increased use of Electronic Health Records. Syntel’s solutions helps
stream line processes with the use of IT, such as the introduction of mobile solutions to
improve access to health information.
Increasing Demand of IT services in Manufacturing Sector
The demand for Syntel’s services in the Manufacturing sector is driven by trends such as the
desire of manufacturing firms to penetrate emerging markets. Syntel’s solutions include
Product Lifecycle Management, Supply Chain Management and operations planning.
5.2 Key Risks
Syntel cannot make any assurances that the development of future facilities will occur or be
completed on time. If Syntel is unable to complete the construction of these facilities, the
Company’s operation and financials will be negatively impacted.
6. Conclusion
The share price had a sharp dip in early October this year. This was largely due to the
sudden issuance of special cash dividends and the lowered expectation of EPS. However, I
believe this one off event would have little to no impact on the future fundamentals and
revenue drivers of the company.
Target Price: $30.37
My stand is to Long Syntel. There is demand for Syntel’s services in numerous industries,
which would result in consistent long term growth for the company.
