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Why the Bravura share price is up 45% in 2019

The Bravura Solutions Limited (ASX: BVS) share price is trading lower at lunchtime on Monday, down 3.41% to $5.39.

Despite today’s fall, however,  Bravura’s share price has had a great start to 2019, up more than 45% year to date, spurred on by a positive outlook and booming fintech sector.

Leadership potential

Bravura Solutions is a provider of software products and services to the wealth management sector and life insurance industry. The company is emerging as a potential leader of the fintech sector following a positive half-yearly report released earlier this year.

Highlights of Bravura’s half-year report included revenue of $127.4 million, profit of $163 million and a 28% increase in EBITDA of $23.8 million. Bravura’s flagship wealth management platform Sonata showed great potential with revenue from the platform growing 24% to $90.4 million.

Fintech gold rush

The Australian fintech sector is on the precipice of extraordinary growth, following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services industries. The regulatory changes and structural drivers recommended present Bravura Solutions with an enormous opportunity.

Bravura Solutions is primed to take advantage of these regulatory changes by offering greater transparency and operational efficiency, whilst also improving customer interaction. The company’s shares price has been in great demand because of this potential. Bravura offers a scalable platform, strong research and development, and recurring revenue. In particular, the Sonata platform is scratching the surface of its market potential.

Potential merger

Earlier this year, rumours were surrounding a possible merger between Bravura Solutions and GBST Holdings Limited (ASX: GBT). Both companies serve the same sectors and could also see Bravura further extend its scope by taking advantage of GBST’s capital markets business. Such a move would make sense given the significant barriers to entry of the fintech sector, with many years of R&D required to build a suitable product line. If not with GBST, there is still a potential for Bravura Solutions to merge with an offshore company to satisfy its unmet potential.

Foolish takeaway

Bravura Solutions is on my long-term portfolio watchlist as I see tremendous potential for growth in the sector and the company. In my opinion, as the market seems a little extended at the present time I would be looking for an entry on any substantial pullback.

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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Bravura Solutions Ltd. 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 Scott Phillips.

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