OneVue (OVH.ASX)

Fat Prophets

Friday 16th October 2015

Hot Stock – OneVue (OVH.ASX)

Cash aplenty

What’s new?

OneVue Holdings Limited released its FY15 annual report in August. The company has continued to benefit from the prosperity of Australian wealth management industry and reported significant growth in revenue and earnings during the past year. The excellent performance was largely driven by a significant growth in funds under administration (FUA) and a strong demand for fund services from Custodians and Investment Managers.

In terms of the numbers, OneVue reported FY15 revenues of $25.40 million, which compared favourably to the $12.2 million reported in FY14. The year-on-year change in underlying EBITDA was even more impressive, jumping 134% to deliver a positive $0.7 million, compared to a $2.08 million loss in FY14.

The key driver of the result was OneVue's Platform Services business, which accounted for more than 70 percent of total income in FY15. Total revenue from this segment was $17.89 million, with this representing an almost 1.5 times increase on the prior corresponding period. The main reason for the uplift in revenue was the significant growth in FUA, which increased from $1.9 billion in FY14 to $3.1 billion in FY15.

While the year-on-year growth in OneVue’s Fund Services segment was less pronounced, it was nonetheless positive, with revenue increasing by 29 percent to $7.5 million. This was driven by a growing demand from Custodians and Investment Managers.

Outlook

Management expects the Platform Services business to continue growing revenue organically by delivering innovative developments such as the new introduced platform – LUMINOUS. Given the expected growth in OneVue’s core business and recent acquisitions in the company’s Fund Services business, it seems reasonable in our view to expect latter to also report further growth in FY16. Given the relatively high fixed cost base of the overall business, we expect to see a further improvement in profitability, with the 2H15 run rate indicating to us that the business is well on track for a maiden profit in FY16.

Price

From a technical perspective, the momentum in OneVue’s share price appears to be recovering following the breach below the rising trend line at the beginning of September. On the back of a revived surge to the upside last week, prices broke out above the 50-day moving average, which is very positive.

Worth buying?

OneVue has performed robustly in the past year, driven by the significant growth FUA and strong demand for fund services from its customer base. We expect future earnings growth will be driven by further scale in existing businesses and by the company building on new intermediary relationships, gaining a larger share of total FUA, as well as increasing the OneVue footprint in the digital investor market. We expect this to be underpinned by the OneVue’s large cash position, which leaves the company primed to take advantage of product development and M&A activities in what is a highly fragmented market.

Greg Smith is Head of Research at investment research and funds management house Fat Prophets. To receive a recent Fat Prophets Report, CLICK HERE

Disclosure: OneVue is held within the Fat Prophets Concentrated Share and Small/Mid-Cap Models. The OneVue platform is used by Fat Prophets Wealth Management.

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