Financial software and technology business GBST Holdings Limited (ASX: GBT) yesterday announced a new business agreement for its GBST-Syn Financial Transaction Tax (FTT) operating platform with German software giant SAP.
GBST has two main operating divisions, the first in capital markets which provides back office technology to capital market facing businesses such as investment managers and brokers. The other division is in wealth administration, which provides software to support pension product administrators, platform providers and users.
The GBST composer platform which is the core piece of software in the wealth administration division is what has been kicking goals recently, winning big new clients and contracts in the UK in particular.
However, the news that the GBST Syn platform will be integrated with SAP technology is significant to investors, as the GBST Syn platform in general is the one that has perhaps not gained as much overseas traction as investors were hoping for.
The SAP deal means GBST's Syn-FTT technology will be integrated into the SAP HANA platform to help investment banks and stockbrokers process equities trades in compliance with the European financial transaction tax. The legislation is active in France and Italy already and expected to be implemented in 10 European countries by 1 January 2016.
It's likely therefore that investment banks and brokers will need to have systems in place prior to this date and will be actively shopping around for the means to achieve compliance.
GBST stated: "Through integration with the SAP HANA platform, we will be able to roll out Syn-FTT internationally." If GBST is able to deliver on this commitment the stock price is likely to climb far above today's level around $5.61.
Although, the SAP agreement is good news it is no guarantee of future sales or revenues and unlikely to have a material impact on the earnings of the Capital Markets business.
However, the future looks bright for GBST if it has both its Syn and Composer platforms firing sales wise overseas, with the fact that it has chosen to release news of the SAP HANA deal suggesting it thinks this is a significant agreement relative to future success.
GBST has a role model to emulate in global financial software giant Iress Ltd (ASX: IRE) and already has a solid business base in Australia providing software services to financial giants like the Commonwealth Bank of Australia (ASX: CBA).
In my opinion GBST remains one of the best small-cap businesses investors can buy on the ASX. It operates in a niche market, where you need technological and business expertise. However, the market is also large and lucrative for any business able to develop anything close to a market-leading position.
