OneVue Holdings

Fat Prophets

Friday 5th June 2015

Sharechat.co.nz – Hot Stock

: OneVue Holdings

Riding the outsourcing wave in a growth industry

What’s new?

Having reiterated its prospectus FY15 guidance at its FY14 results, management has since stated at OneVue’s 1H15 results that the company remained on track to deliver on its prospectus forecast. That is, to deliver a “standalone” EBITDA of $450,000 for the 12 months ending 30 June 2015, with this comparing favourably to the underlying EBITDA in 1H15 of $22,000.

Encouragingly for investors, the funds management platform business has since confirmed that its operating momentum has continued into 2H15, having released a positive 3Q15 update. Key points to note include (i) FUA now in excess of $3 billion, (ii) 3Q15 underlying net operating cash flow of $1.2 million, (iii) 3Q15 underlying EBITDA of $593,000, which brings the year-to-date figure to $615,000.

While OneVue had a net cash position as at 1H15, the transition to positive net operating cash flow in 3Q15 will likely enhance OneVue’s overall capital position. Significantly, OneVue has also recently announced a five year agreement with BNP Paribas to provide unit registry services. The transaction is set to have a material impact on revenues, and further underlines OneVue’s market leading position.

By virtue of being a technology-based business, OneVue’s operating model is highly scalable. This means that OneVue can significantly increase its revenue base without having to add a commensurate amount to its cost base. In our view, the extent to which OneVue can maximise this operating leverage will depend on how successful it is at cross selling between its two operating segments or verticals.

OneVue’s business targets the outsourcing of wealth management functions relating to the manufacture and distribution of financial products and services. OneVue provides (i) outsourced unit registry services and installed software to investment managers, trustees and custodians through its Fund Services business, and (ii) platform-related services to intermediaries through its Platform Services business.

The benefits of outsourcing unit registry services to independent providers such as OneVue include (i) the ability for clients to pool funds to extract efficiencies, (ii) being able to service and support a wider range of financial products, (iii) accessing external core competencies to develop new initiatives, such as mFund, (iv) increased operating efficiencies, and (v) lower operating complexities (i.e. compliance).

Regarding mFund, while it remains to be seen what traction OneVue gets from being a foundation member of the ASX initiative, it does provide another example of a disruptive technology. In essence, the launch of the mFund Settlement Service could have a profound impact on the market by making it easier for investors to buy managed funds directly, while also increasing automation and transaction speeds.

Outlook

As evidenced by OneVue’s 3Q15 results, the period-on-period improvement in EBITDA is being driven by operating leverage. That is, the net inflow of FUA and customer contracts on a relatively high fixed cost base. With Platform Services having moved to a positive EBITDA in 1H15 on the back of record FUA and Fund Services already profitable, the outlook appears positive in our view.

Price

Having traded in line with the broader market for an extended period following its IPO, OneVue’s shares have recently bucked the trend and moved higher. Based on consensus estimates, OneVue’s shares are currently trading at 28.9 times FY16. While this appears expensive, it is supported by a positive technical setup, with the recent break above $0.35 resistance indicative of further gains in the coming weeks.

Worth buying?

We believe that OneVue’s proprietary technologies and ability to add value through acquisitions are enabling the company to capitalise on structural changes within Australia’s wealth management industry. While still early days, the initial signs have been encouraging.

Disclosure: Interests associated with Fat Prophets hold shares in OneVue. The OneVue platform is used by Fat Prophets Wealth Management.

James Lennon is an Analyst at Fat Prophets share market research. To receive a recent Fat Prophets Report, call 0800 438 328 or Click here.

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