there was also a "tip" from pie funds in their June newsletter - (but I'd be happier if they weren't a holder!):
"Stock Update:
Bravura Solutions Ltd
The Growth 2 and Dividend Funds have taken a position in Bravura Solutions Limited (ASX:BVS). Bravura is a market-leading global provider of software to the wealth management and fund administration industries. The company returned to the ASX in November 2016 after a three-year hiatus under private-equity ownership. BVS was previously listed on the ASX until October 2013, when private-equity firm Ironbridge Capital acquired it at a valuation of $172 million (Ironbridge
purchased a controlling stake at lower prices in the GFC, so the cost was less than $172 million).
Ironbridge acquisition
Equity markets place too much emphasis on reported profit, and BVS was a classic example. In the five years prior to the takeover, intangible impairments and high amortisation led BVS to accumulate losses of $26 million and its market cap to
languish around $100 million. However, in the same period, it generated $89 million of cash flow. This allowed Ironbridge to acquire BVS at seven times cashflow after paying a 65% premium.
Ironbridge sought to re-list BVS on the ASX in November 2016, having grown the business from $125 million revenue in 2013, to $187.6 million forecast revenue this financial year (on a constant currency basis, this revenue figure would be much higher due to the devaluation of the GBP 2013-16)."
Regulatory pressures lead to growth
opportunities
Bravura Solutions’ strong growth has been assisted by
industry tailwinds. Clients in the wealth management and
funds administration are facing technology, regulatory
and cost pressures which are driving investment in the
implementation of scalable software solutions, such as
BVS’s flagship product Sonata.
Sonata enables clients to replace multiple legacy systems
with a single product, and has grown from $5 million
revenue in FY13 (the 2013 financial year) to $92 million
revenue in FY17 (the 2017 financial year), reflecting the over
$100 million investment in the product.
The IPO: Scepticism creates
opportunity
Ironbridge initially sought to price the IPO (initial public
offering) in-line with market peers at a FY17 Price/Earnings
range of 16.3x – 19.5x the FY17 PER (price/earnings ratio).
However, poor investor demand led to the deal being cut
to 14.8x the FY17 PER. This meant the company’s implied
market cap at IPO fell from as high as AUD $410 million to
$311 million. Since the IPO, the stock languished, trading
around the IPO price.
It appears that in addition to being generally wary of
private equity sell-downs, the market has tarred Bravura
Solutions with the brush of its prior (misunderstood)
history. This scepticism has created an opportunity.
If Bravura can meet its prospectus forecasts, the market is
likely to start seeing the business for what it is; a growth
business with recurring revenues, sticky customers, a clean
balance sheet and high cash generation.
This should see it trade in line with peers such as GBST
(ASX:GBT) and Iress (ASX:IRE) (greater than 20x FY17
PER and more than 15 times FY17 EV/EBITDA).
Strong growth, clean balance sheet
and high cash generation
All signs indicate that the company is on track to deliver.
It recently reiterated this confidence in its prospectus
forecasts, and provided an early outlook statement for
“continued growth in FY2018 driven by a strong Sonata
pipeline”.
BVS will also benefit from a foreign exchange tailwind in
FY18 that is not currently being factored in by sell-side
analysts. Prospectus forecasts were based on GBP/AUD of
1.60 (currently at 1.72), with every 5% move delivering an
additional $2 million NPAT.
We believe that Bravura Solutions’ strong growth, large
operating leverage, clean balance sheet and high cash
generation should attract a market multiple over time.
(20min delay)