The Bravura Solutions Ltd (ASX: BVS) share price is 2.24% higher at $5.03 on Thursday afternoon, up more than 20% in the past month.
Bravura is an industry leading financial infrastructure provider in the business of providing superannuation funds, life insurance companies and wealth managers with client portals and back end infrastructure. Its flagship product ‘Sonata’ is a wealth management administration system that helps businesses keep on top of customer relations as well as providing the back-end systems for investment professionals.
Bravura held its annual general meeting (AGM) at the end of November, and it proved to be a turning point for the company’s struggling share price. After reaching its all-time high at the end of April of $6.27 per share, the bears took over, driving the Bravura share price down below its January open price of $3.89 to $3.73. Things turned around quickly after the market took kindly to the AGM presentation and the BVS share price soared 27.7% to $4.98 within 2 trading sessions.
Was this a re-rate or just the market being overly optimistic about this software company’s future? Let’s dig deeper.
2019 Annual General Meeting key points:
Bravura met guidance
When a company meets guidance, this is seen by the market as a positive, especially when the guidance figures are set internally and not by an analyst. Revenue grew by 16%, which met its expected growth target of mid-teens, furthermore earnings before interest, tax, depreciation and amortisation grew by 27%, which was above expectations. Another important metric that Bravura was able to honour was its dividend payout ratio of 70% of net profit after tax. The Chairman attributes the strong performance of the company to its expanding suite of software that is always striving to meet its customer’s needs.
Midwinter and FinoComp acquisition
Bravura has a unique method of expanding upon its software suite. It is fond of acquiring companies that already offer a functionality that it believes would provide benefit to its existing customer base. Combined acquisitions throughout FY19 totalled AU$75 million. FinoComp is perhaps the more strategic acquisition due to its geographical location in the UK. Bravura expressed its interest in expanding its operations into Europe through this recently acquired platform.
Big name customers
We all love to name drop and Bravura is no exception. In its AGM announcement, Bravura listed its largest and most notable clients which included: “Fidelity International, Bank of New York Mellon, JPMorgan, Prudential, Mercer, Westpac NZ, ASB Bank, TAL, Suncorp, STANLIB, Legal & General, Schroders, Lloyds and Citi.” If I was a betting man, I’d put money on 100% of people recognising at least one of those heavyweights in the financial sector. By having clients on board of this calibre it allows Bravura to show the market that its platform has earned its stripes.
Bravura’s growth outlook
The CEO’s and Managing Director’s speech touched on the optimistic growth outlook for the company. Firstly, as mentioned above, Bravura is eager to break into the international market starting with Europe due to similar market characteristics to the ones that it already operates in. Bravura plans to do this through a series of acquisitions, the first being FinoComp.
Secondly, Bravura seeks organic growth through the development of its product ‘Sonata’. The logic goes: if current customers are offered a new service/tool/feature that complements the current Bravura products being used, then they are likely to adopt this new feature due to how well the software integrates. This logic is coined as a “single unified customer-centric platform” by the company. A bit like how Apple released Apple TV, a new product within an already existing eco system.
Bravura Solutions is doing all the right things while still managing to maintain adequate capital for future acquisitions, which is its core strategy to expand its product suite. Financial infrastructure historically is a messy and fragmented market that causes headaches for financial advisers and their clients.
The Bravura share price has been much higher than what it is currently trading at, which confirms future investors that there is upside potential for the firm. If FinTech is your sector, I think Bravura Solutions Limited is worth a look.
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Motley Fool contributor Jack Kaminski has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Bravura Solutions Ltd. The Motley Fool Australia has recommended 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.