2 reasons Iress Ltd shares are surging today

Credit: Spyros Papaspyropoulos

Financial software company Iress Ltd (ASX: IRE) has rallied around 5.8% on Wednesday to outpace the broader market gains.

Investors have been in a buying mood across the board with the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) up around 1%, after a few rocky days post the United Kingdom’s (UK) referendum.

Reason 1

While there appears to be a “relief rally” underway which is lifting lots of share prices, the biggest beneficiaries of the rally are arguably the stocks most exposed to the UK economy which investors were busily selling recently.

With significant business operations in the UK, Iress falls into this category.

At a recent Iress presentation, the group noted that the UK wealth market is broad and deep and offers a significant opportunity for Iress. In fact, Iress entered the UK a long time ago and in 2013 the group acquired the UK-based Avelo. In 2015, two more UK acquisitions were made – Proquote and Pulse – which furthered the group’s exposure to the UK economy.

This growing UK presence has in turn resulted in a growing contribution from its UK operations. In 2015 the UK contributed 23% to group earnings.

Today’s rally in Iress’ share price is perhaps a sign that investors are taking a more positive view on the long-term outlook for Iress’ UK operations rather than any near-term negative effects which a ‘Brexit’ may cause.

Reason 2

Iress yesterday announced that it has signed an agreement with the Nsx Ltd (ASX: NSX), but perhaps the market is only today taking notice. The NSX operates two stock exchanges, namely the National Stock Exchange and the SIM Venture Securities Exchange.

According to the release, Iress will integrate order entry for these two exchanges into its globally distributed trading platforms, allowing market orders via the Iress interfaces and platforms. While the NSX deal is unlikely to be a meaningful contributor to earnings, it is perhaps a reminder to investors that Iress remains a growth stock.

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Motley Fool contributor Tim McArthur owns shares in Iress Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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