Macquarie Research: SAP issues bullish FY11 guidance

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MacqTech Express
SAP issues bullish FY11 guidance
Event
 SAP reported a bullish 2011 outlook yesterday and published its FY10 results.
We believe the optimistic guidance provides another data point validating our
investment thesis on global IT services players.

Impact
 FY11 guidance and full-year result details: SAP reported revenue of
€12.4bn (Up 17% YoY) and PAT of €1.8bn (Up 4% YoY) with an operating
margin of 20.7%. The new licence sales revenue of €3.2bn was up 25% YoY
(16% on constant currency basis). The company guidance for FY11 and past
financials are detailed in the table below:
CY11E – another year of strong growth
CY09 CY10 CY11E
Reported SSRS* revenue growth (%) -5 19 na
Constant Currency Growth (%) -5 13 11-14
Reported Software revenue growth (%) -27 25 na
* SSRS – software and software related services
Source: Macquarie Research, January 2011
 Colour on geographic growth – Europe posts rebound: From a regional
perspective, 4Q10 software sales in EMEA grew 21% YoY, Americas +39%
and APAC +7% (all growth figures in constant currency). Given SAP’s preeminent
position in EMEA, growth momentum in Europe would be an
important driver for several quarters to come and backs up the company’s
bullish guidance. (For a detailed take on results and outlook, please see
Marco Zeidler’s view in http://macq.wir.jp/l.ut?t=1Cm6vnR0m.)
 Reiterate OP on HCLT – our preferred pick to play rising discretionary
spend. We prefer HCLT to play the rise in discretionary spend coming from
Europe and Manufacturing, as seen in the recent December quarter results of
SAP and Indian IT vendors. HCLT derives 27% of its revenues from the
European geography (highest amongst peers) and 27% of its revenues from
the Manufacturing vertical.
Outlook
 Remain bullish on growth prospects of IT services: SAP results provide
us comfort on our current growth estimates for IT services players. We are
building in 27% US$ revenue growth for Tier1 players in Indian IT.