Delivery The Key For Bravura Solutions FN ARENA NEWS - 17/05/2007 Changes to superannuation laws have made the sector and those companies providing funds management services much more attractive to investors. Another way to gain exposure is via companies providing essential software and programs for the managers to use. An example is Bravura Solutions (BVA), a provider of consulting service and wealth management applications to the investment management sector, which includes superannuation providers, fund managers and life insurance companies. Listing in the middle of last year the company is slowly gaining increased attention in the Australian market, particularly following its recent announcements. These include the acquisitions of AB Prodata and Rufus in the European markets and a deal with New York Life that gives the company increased exposure in the Asian marketplace. Macquarie sees the Rufus acquisition in particular as a source of significant potential upside, as it provides the means for the company to penetrate the wrap product market in the UK, which offers the chance for the group to cross-sell its other products. This provides some scope for the company to develop in the UK along the lines of its domestic operations, the broker noting management has taken advantage of what is a fragmented market and developed a full range of products, so providing it with more selling opportunities. The growth potential in Asia is also significant, as UBS sees the deal with New York Life as not only supporting earnings expectations both this year and next but offering additional upside from the development of its Sonata Risk Module application. By entering the Asian market through the deal the company will be exposed to a number of potential new customers, while the broker sees opportunities to boost earnings by means of scoping studies and other such work. It estimates such studies could generate as much as $500,000 per country, so having moved into five countries initially a solid boost is possible. Credit Suisse notes the New York Life arrangement is likely to be extended into more countries in the region, which would add to the upside potential. The broker rates the stock as Outperform while suggesting the key issue for the company is not the growth potential but delivering on this potential, as it has experienced a period of significant growth in a short-term and there remains the chance of some integration issues. There has been some evidence of this with delays to the Sonata rollout and some integration costs stemming from the UK acquisition, but in the broker's view it remains too early for a definitive view on how well management are handling the issues. Assuming a worst-case scenario the broker values the stock at $2.08 while its best-case outcome is in excess of $5.00, so there appears solid upside potential if management can get things right. Macquarie is similarly cautious given the integration risks in the short-term, but points out the revenue gains over a two to three year period should be significant. While the upside potential sounds good, UBS notes with the stock trading at around 28x FY08 earnings the upside potential appears largely priced in at current levels. The broker rates the stock as Neutral, as does Macquarie, while Credit Suisse sees it as a Buy. The only other rating in the FNArena database is a Hold from Aspect Huntley. The average price target according to the database is $2.42, while broker earnings estimates are largely in line with prospectus guidance for the current year. Shares in Bravura are unchanged today at $2.13, having traded in a range of $1.19-$3.10 over the past year but having come off its highs following a recent rights issue.
BVA Price at posting:
0.0¢ Sentiment: Hold Disclosure: Held
