To provide my own perspective and in my own words on OVH:
1. I tend to avoid fintech because it is just too hard to pick winners. That said, it is only recently that OVH has used the term.
2. I think there are three parts to OVH: market leaders, adjacent offerings and disruptors.
3. They are leaders in two markets through acquisitions and this provides a foundation for growing cashflow. In five to ten years time, these businesses should survive, if not thrive.
4. They are branching out to adjacent offerings either through acquisitions or building their own products and services. The approach has been quite methodical and well paced. I think these have a better than even chance of contributing to free cash flow.
5. The disruptors, including FUND.eXchange, are in-house investments trying to strengthen their offering to existing clients and to win new ones. As a small company, they don't have unlimited capital to fund these investments. For investors, this is a tricky part of the business as the payoff is more uncertain.
6. It doesn't come through their communications (as we don't get a good feel in how their operating expenses split into maintenance and growth capex), but I feel they invest in their moat intelligently. However this has and will continue to mask their earnings potential.
7. My hypothesis on the recent and ongoing price action is the market is waiting to see the full benefits of DVA in the accounts, rather than the quoted progress. This might put an end to the relatively depressing price action, which suggests FY17Q4 or FY18Q1.
The difference with SEQ is I can't see out five to ten years time i.e. their competitive advantage does not lie in scale or technology, but its people. If they can attract and maintain talented staff, then there could be plenty of upside from a valuation perspective even after the recent price rise.
OVH Price at posting:
52.0¢ Sentiment: None Disclosure: Not Held
