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Blog

GBST Holdings – Major milestone passed

Ivor Ries

CoFunds client transfer should boost confidence

GBST Holdings (GBT) recently completed the transfer of 400,000 customer accounts worth £37b from a legacy technology system to its Composer wealth management system on behalf of its largest UK client, Aegon Group. The transfer of accounts from the former CoFunds platform to Composer was on budget and completed just one month behind the original schedule. This is an outstanding outcome compared to other platform technology conversions attempted in the UK in recent times.

No change to forecasts but risks remain

There are no changes to our forecasts as Aegon revenues were already included in our estimates. In our view there remains some short-term earnings risk in GBT due to the unpredictable nature of timing of payments for the Composer 2.0 rebuild. GBT's FY18 guidance is for pre-Composer operating EBITDA in a range of A$20m to A$25m and for software development costs of A$10m to A$15m, leaving a wide range of potential reported EBITDA outcomes.

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 Composer 2.0 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 early or at a lower cost.

Investment view

Despite the recent setbacks we believe that GBST Holdings 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 able to fund its way through the near-term development costs with 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.