BVS - Bravura Solutions

[steve fleming]

Fast growing global IT success story, providing services and applications for portfolio management, life insurance and pension industries.

I picked up some of these @ $1.30 in the recent selloff after watching it fall from $3.10 to $1.17 over the last year

A well received financial report for FY07 with revenues of $100m and NPAT of $5.3m (After R&D of $10m)

Consensus FY08 is for revenues of $161m and NPAT of $13m jumping up to $20m in FY09. This excludes any earnings related to future acquisitions.

Revenue increasing both organically and by acquisitions. Have started to leverage their products into the lucrative and fast developing Asian markets. Management also believe they have a unique oportunity to further their recent European successes.

EBITDA margins for FY08 were a healthy 16.6%(adjusted for integration costs) and forecast to be approx 17% in FY08 increasing as scale efficiencies and integration synergies flow through.

Revenues underpinned by recurring maintenance revenue, including $30m a year from Bank of New York.

Management are the major shareholders and have basically delivered on most of their key IPO projections.

CSFB came out on Monday with a $2.80 target, and Huntleys have had BVA as a buy at under $1.90 for most of this year.

[steve fleming]

Delivery The Key For Bravura Solutions
FN ARENA NEWS - 17/05/2007


Changes to superannuation laws have made the sector and those companies providing funds management services much more attractive to investors. Another way to gain exposure is via companies providing essential software and programs for the managers to use.
An example is Bravura Solutions (BVA), a provider of consulting service and wealth management applications to the investment management sector, which includes superannuation providers, fund managers and life insurance companies.

Listing in the middle of last year the company is slowly gaining increased attention in the Australian market, particularly following its recent announcements. These include the acquisitions of AB Prodata and Rufus in the European markets and a deal with New York Life that gives the company increased exposure in the Asian marketplace.

Macquarie sees the Rufus acquisition in particular as a source of significant potential upside, as it provides the means for the company to penetrate the wrap product market in the UK, which offers the chance for the group to cross-sell its other products.

This provides some scope for the company to develop in the UK along the lines of its domestic operations, the broker noting management has taken advantage of what is a fragmented market and developed a full range of products, so providing it with more selling opportunities.

The growth potential in Asia is also significant, as UBS sees the deal with New York Life as not only supporting earnings expectations both this year and next but offering additional upside from the development of its Sonata Risk Module application.

By entering the Asian market through the deal the company will be exposed to a number of potential new customers, while the broker sees opportunities to boost earnings by means of scoping studies and other such work.

It estimates such studies could generate as much as $500,000 per country, so having moved into five countries initially a solid boost is possible. Credit Suisse notes the New York Life arrangement is likely to be extended into more countries in the region, which would add to the upside potential.

The broker rates the stock as Outperform while suggesting the key issue for the company is not the growth potential but delivering on this potential, as it has experienced a period of significant growth in a short-term and there remains the chance of some integration issues.

There has been some evidence of this with delays to the Sonata rollout and some integration costs stemming from the UK acquisition, but in the broker's view it remains too early for a definitive view on how well management are handling the issues. Assuming a worst-case scenario the broker values the stock at $2.08 while its best-case outcome is in excess of $5.00, so there appears solid upside potential if management can get things right.

Macquarie is similarly cautious given the integration risks in the short-term, but points out the revenue gains over a two to three year period should be significant. While the upside potential sounds good, UBS notes with the stock trading at around 28x FY08 earnings the upside potential appears largely priced in at current levels.

The broker rates the stock as Neutral, as does Macquarie, while Credit Suisse sees it as a Buy. The only other rating in the FNArena database is a Hold from Aspect Huntley. The average price target according to the database is $2.42, while broker earnings estimates are largely in line with prospectus guidance for the current year.

Shares in Bravura are unchanged today at $2.13, having traded in a range of $1.19-$3.10 over the past year but having come off its highs following a recent rights issue.

[stephen]

How would you characterise their revenue sources?

What I'm thinking is this:

- revenue from licensing software can be annual or one-off, depending on the model, but in any event it can scale far faster than overheads.

That's some pretty stunning forecast growth I must say.
- revenue from services pretty much only scales with employee numbers, and in fact there's a real risk that as you grow you dilute your ability to enforce your methods, as new hires outnumber the old-timers.

[Hommel]

Fisher Funds has a stake in this one. At the recent roadshow they were very enthusiastic about Bravura.

[macduffy]

SteveF:
Where do you get a sp of $2-13?
BVA closed yesterday at $1-70, its highest price since the low around $1-20.


Disc: small BVA holding.

[macduffy]

Sorry, Steve F
Didn't realise that the last sentence was part of the 3 and a half month old article!

[steve fleming]

Footsie - good call re the retrace. However it has been on exceedingly light volume (ie average of about 50,000 shares per day).

By contrast, the rise from 1.30 to 1.70 saw volumes average over 500,000 (10 x higher)

Also, FYI, the Corporations Act requires Substantial holders to notify any changes in their holdings of more than 1%, within two business days.
Pretty severe penalties apply if this is not complied with.

[Footsie]

Yes steve

but the point is Queensland investment are now below the 5% mark

So they dont have to file anything.

Hence why i think its them selling out
5% is 7.1m shares

Look im not trying to argue with you guys.
I like BVA as much as you do.
I'm just trying to be 100% sure that the downtrend is over.
Therefore unlike mosteph i'm not trying to pick bottoms
I'm just waiting for confirmation that its time to go long -boots and all

[Phaedrus]

This chart illustrates some of the points that others here are making.

The On Balance Volume indicator gives good insight into whether volume is flowing into or out of a security and often gives early warning of changes in market sentiment. Usually, such warnings precede other more commonly used signals. That was not the case here though, when the break of the upward trendline triggered a Sell some days ahead of any obvious OBV signal.

The histogram along the bottom of the chart depicts Volume. Up days have green bars, down, red, and blue = no change. You can easily see the effect that high volume days have on the OBV plot. I have circled "steps" in the OBV that were caused by the 2 biggest "up" days and the 2 biggest "down" days. Obviously the former are Bullish and the latter Bearish.

So, what does this chart show? Well, firstly, it shows that BVA is still in a downtrend. Right now, it would need a Close of above 170 to end this downtrend by confirming the existence of an uptrend. Note, however the following :-
(1) The big down days are getting progressively smaller.
(2) The OBV appears to be flattening out, maybe even beginning to rise.
(3) See how over the last couple of weeks, the Up day volumes have been markedly higher than the Down day volumes.
(4) Notice the recent 4 consecutive Up days. (First time all year)
(5) These Up days were on increasing volume.

All of the above are evidence that the downtrend is weakening. I wouldn't be buying yet, but any/all of the following would generate Buy signals, in my opinion.
(1) A break of the trendline.
(2) A clear rise in the OBV.
(3) A break above 170 (the beginning of an uptrend)

I usually avoid giving any personal opinion at all with regard to charts that I post, and prefer to let the market speak for itself. Here, though, I'm almost prepared to stick my neck out and say that it looks as though the bottom is in at 130.

Time will tell though eh?

[Footsie]

Its now cut through the red line phaedrus has drawn.....

I can hear someone ringing a bell !!

I close into the 1.60's and a hold above this level would signal it for me.

Is Queensland investment nearly finished?

Time will tell.