Company Overview: OneVue Holdings Limited is engaged in providing outsourced superannuation administration, unit registry, and end-to-end superannuation services, including the provision of investment and portfolio administration, tax and reporting services. The Company's segments include Fund Services, Platform Services and Corporate. The Fund Services segment provides outsourced unit registry and installed software to a range of investment managers, custodians, trustees and superannuation administration. Its Platform Services segment offers services, including investment administration, tax and reporting services for both superannuation and other investments, a retail superannuation fund, self-managed superannuation fund (SMSF) compliance and administration services and investment management. It manages asset classes, including listed shares, term deposits, warrants, as well as personal assets and investments, including collectibles.
 

OVH Details

Significant Recurring Revenues Builds Confidence in Operating Capabilities: OneVue Holdings Limited (ASX: OVH) happens to be an ASX listed company and is a wholesale provider of the self-managed super fund, retail super and digital member based investment solutions. As on June 25, 2019, the market capitalisation of OneVue Holdings Limited stood at ~$115.12 million. The company had earlier released their results for half-year ended December 2018 in which it highlighted its sharpened focus on the continuing businesses of Fund Services and Platform Services. The company stated that quality recurring revenues are representing 91% of the revenues and it had also wrapped up the strategic repositioning with the final divestment being Superannuation Trustee business. The company’s revenues from continuing operations witnessed a rise of 31% over the prior comparative period. OVH added that the revenues continue to be supported by recurring revenue’s quality. The company’s operating profit in 1H FY 2019 got impacted by the $3 million cost adjustment, which reflects an increase in the fair value of the contingent consideration due on KPMG Super acquisition. This got triggered by the signing on December 21, 2018 of the three-year contract with Aon Hewitt Limited and Equity Trustee Superannuation Limited for the administration of KPMG Super businesses largest fund.


1HFY19 Key Metrics (Source: Company Reports)

The company’s cash and cash equivalents stood at $15.7 million as at December 31, 2018, which was $3.7 million lower than the position as at June 30, 2018. The company added that there were $1.7 million of the loan repayments which were made during the period, and $0.7 million was paid towards the integration restructure and acquisition costs. OVH added that the debt as at December 31, 2018 amounted to $4.7 million, which is mainly related to Superannuation Trustee Services business and was $1.5 million lower primarily because of the loan repayments.

Moving forward, macro industry trends might act as tailwinds for the overall performance of OneVue Holdings Limited. The increasing trend of outsourcing the superannuation administration, unit registry, and end-to-end superannuation services could be a primary growth contributor to the company. Additionally, there are expectations that the company would be benefitted by the pipeline of new business opportunities. Also, respectable CAGR growth in its top line (FY 2014-FY 2018) can also attract the attention of market players.

Top 10 Shareholders: The following table provides a broad overview of the top 10 shareholders of OneVue Holdings Limited:


Top 10 Shareholders (Source: Company Reports)

A Quick Look at Key Ratios of OVH: The gross margin of OneVue Holdings Limited stood at 82.2% in 1H FY 2019, which is higher than the industry median of 74.1%, which could be considered as a positive point. In FY 2018, its net margin stood at 14.5%, which reflects a rise of 14% on the YoY basis and, thus, it looks like that the company had been strong enough to convert its top line into the bottom line.


Key Metrics (Source: Thomson Reuters)

The company’s current ratio in 1H FY 2019 stood at 1.77x, which reflects an improvement of 20.3% on the YoY basis that indicates that the company is having decent liquidity levels. Also, it reflects that OVH would be able to make sufficient deployments towards its key business activities which could support the long-term growth. Its Assets/ Equity ratio stood at 1.38x, which is lower than the industry median of 7.26x.

Understanding Drivers of Fund Services Business: With respect to 1H FY 2019 results, OneVue stated that the key growth drivers were a continuation of contracted transitions, securing new clients as well as integrating the KPMG Super acquisition. The company added that Fund Services revenue witnessed a rise of $5.1 million or 44.7% over the prior corresponding period and there was robust growth from both Managed Fund Administration and Super Member Administration. However, it got offset by exited RE business.


Fund Services Key Measures (Source: Company Reports)

The company’s market-leading Managed Fund Administration business witnessed an increase of 61% in the items processed and there was processing of 256,016 items in the period. The growth was because of the combination of new clients as well as continuing organic growth.

Platform Services Business: Gross Inflows and Net Inflows in Line within Historical Underlying Trend: OVH added that the structural disruption has been driving the momentum even though there were market declines in the last quarter of 2018. The company stated that Platform Services FUA (or Funds Under Administration) amounted to $4.39 billion, which reflects a rise of 7% on the prior comparative period after adjusting for the exit of SMSF Admin and Investment Management Businesses. It was also mentioned that gross inflows amounting to $0.6 billion and net inflows amounting to $0.2 billion were in line with general trend excluding the one-off transitions.


Platform Services (Source: Company Reports)

OVH Continues to Deliver Growth in March 2019 Quarter: In the Fund Services business, with respect to Managed fund administration, it was mentioned that the fund numbers reached 1,348, which represents the record number of funds as well as growth of 41% on the previous quarter and a rise of 78% on PCP. Coming to the Platform Services business, the FUA had reached $4.7 billion, which reflects a rise of 7% on the previous quarter and an increase of 15% on PCP, taking the annual inflows to $1.2 billion. With respect to the Platform Services business, the company stated that the transition of FUA of $500 million from the two new white labels signed in the previous quarter is due for the completion in the next quarter.

Key Takeaways from Sydney Investment Forum’s Presentation: In the presentation, OneVue Holdings Limited highlighted about their business as well as about the consistent robust revenue growth, which it has been achieving. It stated that Platform Services has been witnessing a CAGR growth of 24% in its revenue in the time span of 1H FY 2017- 1H FY 2019. Between the same period, the Fund Services revenue had been witnessing the CAGR growth of 30.5%.


Consistent Robust Revenue Growth (Source: Company Reports)

In the presentation, the company also stated that it is focused towards strong growth runways in both the businesses as well as it is having a record pipeline of the new business opportunities.

Key Information About Trustee Services Sale: As per the release dated May 31, 2019, OneVue Holdings Limited stated that OVH and Sargon Capital Pty Limited have been working closely together with respect to the transition of the business as well as only one condition precedent remains to be satisfied. However, as per the release dated June 21, 2019, both the companies have agreed to wrap up the sale of Trustee Services to Sargon on June 27, 2019.

What to Expect From OVH: Recently, OneVue Holdings Limited stated that macro industry trends support its momentum. The company stated that there has been increasing trend to outsourcing and regulators, fund managers as well as investors are calling for the greater transparency of costs and revenue drivers. OVH also mentioned about the pipeline with regards to the new business opportunities which could help the broader performance of the company moving forward.

In the conference call transcript for 1H FY 2019 results, it was mentioned that the company has systematically executed the series of transactions in order to sharpen the strategic focus and maximise the shareholder value and have strengthened as well as made deployments towards both Platform Services and Fund Services. The company had positioned itself for the growth and it happens to be well-funded in order to deliver the sustained growth. Additionally, the continuing businesses are having strong structural tailwinds and growth runways. All these factors might attract the attention of the market players moving forward.


Key Valuation Metrics (Source: Thomson Reuters)

Valuation Methodologies:
Method 1: PE- based Valuation
 
PE- Based Valuation (Source: Thomson Reuters), *NTM-Next Twelve Months

Method 2: EV/Sales Multiple Approach

EV/ Sales Multiple Approach (Source: Thomson Reuters) *NTM-Next Twelve Months

Stock Recommendation: There are expectations that OneVue Holdings Limited could be benefitted moving forward largely because of its recurring revenues. As mentioned earlier, recurring revenues in 1H FY 2019 represent 91% of the total revenues, which could be a key driver moving forward. The company stated that recurring revenues consists of a blend of fees based on the items processed, number of members as well as basis points fees. With respect to the Fund Services, the company had highlighted the track record of consistent growth and profitability. The company’s top line had witnessed the CAGR growth of 38.88% (FY 2014-FY 2018), which reflects OVH’s robust revenue generation capabilities. Moreover, there are expectations that these capabilities might support the company’s growth prospects moving forward. However, the company’s stock had delivered the return of 4.82% in the span of previous three months, while in the time frame of past one month, the return stood at -9.38%, which reflects that the stock is quite volatile. Based on the foregoing, we have valued the stock using two Relative valuation methods, P/E and EV/Sales multiple and arrived at a target price in the range of $0.51 to $0.55, which is offering double-digit upside (in %). Hence, considering the above-stated facts and current trading level, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.425 per share (down 2.299% on 25 June 2019).
 

OVH Daily Chart (Source: Thomson Reuters)

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