GBST Holdings

About the author:

Ivor Ries
Author name:
By Ivor Ries
Job title:
Senior Analyst
Date posted:
14 February 2018, 12:31 PM
Sectors Covered:
Information Technology, Online Media

Key points

  • Although down on last year, GBST's half year profit was better than we had expected.
  • The win of a major new client – Japan's SBI Group – will deliver new growth in recurring licence income from FY19 onwards.
  • Despite the heavy investment in core systems redevelopment, cash generation was strong and came in ahead of our forecast.

Guidance re-affirmed

GBST Holdings (GBT) reported a first half net profit of A$2.5m, ahead of Morgans' forecasts, and re-affirmed guidance for full-year EBITDA in a range between A$20m to A$25m before strategic R&D costs, estimated in a range between A$10m and A$15m. After stripping out A$256k in one-off items, the result was well ahead of our expectations. Cash generated from operations (A$5.4m) was A$1.5m better than our forecast. 

Several major new accounts were won in the half-year, including Japan's SBI Group.

Risks and catalysts

Potential near-term risks to GBST include:

  1. failure to win new clients for the Composer or ~Syn platforms;
  2. political and economic turmoil which undermines confidence among major wealth managers;
  3. unexpected loss of a major client; and
  4. further cost over-runs in the current software rebuild.

Potential near-term catalysts include:

  1. significant new client wins;
  2. stabilisation of demand for wealth management services; and
  3. the new software being delivered earlier or at a lower cost.

Investment view

Despite the recent setbacks we believe that GBST is developing a global franchise as a supplier of core systems to large banks and wealth managers. Near term the stock may remain weak as doubts persist about the completion time and cost of the Composer 2.0 rebuild. The company is well capitalised and is able to fund its way through the near-term development costs from cash flows.

We retain our Add recommendation.

More information

Morgans clients can login to view our detailed report and share price target for GBST Holdings (GBT). Alternatively, please contact your Morgans adviser or nearest Morgans office for access.

Disclaimer(s): Analyst owns shares.

The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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