Criterion The Australian December 06, 2013 12:00AM
Rubik Source:..TheAustralian
THIS one's right up Criterion's alley: an esoteric tech play, albeit with a brick outhouse-solid earnings record and an exposure to the onwards-and-upwards financial advisory sector.
Rubik Financial CFO Paula Kensington is the first to admit that Rubik -- formed from the shell of a forestry company -- hasn't registered on the instos' radar. But management's bold aspiration to become an ASX 300 company within three years -- implying a market cap of at least $180 million compared with the current $26m -- is attracting the attention of those still with loose change after the flood of IPOs.
True to the notion of Rubik's "Cubed", the company operates in three sectors: software for financial planners, financial information for industry participants and core banking systems for Australian financial institutions.
Last year's revenue of $23m was skewed 55 per cent to the wealth sector, including support systems to the institutional planners (big four-bank owned offshoots and AMP) and independent networks.
According to Kensington, Rubik (RFL, 26c) gleans solid annuity income from its activities. In the wealth sector, Rubik's COIN product is No 2 behind the locally owned Xplan and ahead of Midwinter. Rubik bought COIN from Macquarie Group for $26m in July last year. "The only bank we don't have is National Australia Bank, but we are up against them with every other bank," she says.
Core banking systems are more problematic, in that the main banks are wedded to legacy systems and reluctant to change provider. "It's like a heart-lung transplant," she says. "It will knock you off your feet and turn your life upside-down for years."
Rubik's focus is the smaller banks and credit unions and lesser known (but substantive) financial service players such as United Church's United Financial Services. Kensington says about 300 customers are using products such as voice recognition software, but she admits Rubik's "bank in a box" product -- core pay-as-you-go banking software -- is taking longer to find market acceptance.
In financial information, Rubik competes squarely with the listed Iress, but Kensington claims the brokers' fave has been distracted by their recent mega-purchase of Avelo Financial Services in Britain. Rubik managed underlying EBITDA of $6m in 2012-13 and expects to do $9m this year.
Most of the wealth segment revenue is earned as a licence fee or consumption-based usage fee so can be seen as annuity income.
