What is the stock?
The technology company Bravura Solutions (ASX: BVS) passes our ethical screens as we like the long-term savings industry and see quality software technology, such as Bravura Solutions, improving efficiency and effectiveness in the superannuation and investment industries.
How long have you held the stock?
We have held Bravura since its IPO in November 2016 and have consistently added to our position since then, including during the sell-down by IronBridge Capital in September last year. Since the IPO, the stock is up around 40%.
What do you like about it?
We like the growth in wealth management software, particularly in the United Kingdom and South Africa. The existence of compulsory superannuation in Australia has enabled the likes of Bravura Solutions to develop sophisticated wealth management software administration platforms, which have been transferred and developed further for the much larger UK market. The recurring revenue streams across wealth management and the fund administration businesses owned by Bravura are encouraging.
How is it better than its competitors?
Bravura has the most sophisticated software offering in the wealth management market, following an investment of more than $100 million into the development of its flagship Sonata product. Sonata offers superior software architecture to other competitors in the market, providing customers with greater breadth of product coverage, improved scalability to grow with their business, and a single line of code that enables easy updates for customers to stay relevant. This will provide Bravura with a competitive advantage in the market and as its customer base grows, we expect Bravura’s profit margins to increase.
What do you like about its management?
The managing director has been with the business for more than 10 years, through a period of private equity ownership. He has overseen the company taking some hard medicine, with the company now coming out the other side.
What is your target price?
We believe $2.50 is achievable if Bravura continues to execute on converting its pipeline of opportunities into new customer contracts in coming years.
At what point would you sell it?
We are fundamental investors and would consider selling any name when the share price exceeded our valuation. We also take into account the share trading liquidity in any sell decision.
How much has it added to your overall portfolio over the last 12 months?
We have doubled our position in Bravura Solutions over the last 12 months and currently hold around 1.6% in our flagship Australian Ethical Australian Shares Fund.
Where do you see value?
The stock trades on a reasonable 15 times 2018 earnings, while paying dividends. In our opinion Bravura is one of the cheapest enterprise software companies listed on the ASX.
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