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

Decent Growth Witnessed in Top-Line and Balance Sheet Strengthened: OneVue Holdings Limited (ASX: OVH) is a wholesale service provider to the wealth management industry. As on September 10, 2019, the market capitalization of OneVue Holdings Limited stood at ~A$100.36 million. It has two core business segments, i.e., Fund Services, and Platform Services, which accounted revenue around 64% and 36%, respectively in FY19 of total revenue. Recently, the company released a decent set of numbers for FY19 in which its revenue witnessed a rise of 35.3% to A$49.6 million while, during the same period, the company’s EBITDA amounted to $4.5 million, which reflects an increase of 59.1% on a YoY basis. As far as the business highlights are concerned for FY19, it was mentioned that 93% of revenues are recurring and its market share has been growing. Additionally, the strategic acquisition of KPMG super business has strengthened the company’s capability, which further enhances its competitive position. Further, the company mentioned about the key growth drivers for Fund Services business, which includes the continuation of contracted transitions, securing new clients and integrating KPMG Super acquisition. Coming to the Platform Services, which represents 36% of the total revenues, it was stated that the business witnessed record gross inflows amounting to $1.8 billion, which reflects an increase of 11%, and the net inflows amounting to $1.0 billion that is up 17%. The company’s balance sheet was strengthened after the sale of Trustee business, and this might help the overall company in achieving long-term growth objectives.

Moving forward, there are expectations that capabilities to garner revenues and build cash levels and decent operational capabilities might act as tailwinds for long-term growth. Also, the company might be supported by decent liquidity position.


FY19 Financial Results (Source: Company Reports)

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

Top 10 Shareholders (Source: Thomson Reuters)

A Quick Look at Key Metrics: The gross margin of OneVue Holdings Limited stood at 83.5% in FY19, which is higher than the industry median of 67.2%. Additionally, the company’s current ratio stood at 2.70x in FY19, which is higher than the prior year figure of 1.05x, showing that the company has improved its capability to meet its short-term obligations over the prior year. Additionally, decent levels of liquidity might help the company in making deployments towards the key strategic objectives which could help the overall company in achieving long-term growth. Debt/Equity ratio has been reduced in FY19 on a YoY basis and, thus, it can be said that the company is focusing on deleveraging its balance sheet. The lesser debt on the balance sheet, generally, helps the company in carrying out targeted growth plans in an effective and efficient way.


Key Metrics (Source: Thomson Reuters)

Understanding Performance of Fund Services Vertical: The company stated that robust growth of Fund Services vertical has continued which was because of the move to outsource administrative functions to the specialist providers. Additionally, it was mentioned that Fund Services delivered revenue growth of 38% and an EBITDA improvement of 27.8%. It was further stated thatthe acquisition of KPMG superannuation administration business added depth and breadth to the superannuation capability and has positioned the business well in order to continue to increase the market share further.    


Fund Services Dashboard (Source: Company Reports)

Total FUA of Platform Services on Rise: The Platform Services business has witnessed gross inflows amounting to $1.8 billion, which reflects an increase of 11% while the net inflows amounted to $1.0 billion, which is up 17%. It was mentioned that there is a significant market opportunity for the organic as well as acquisitive accelerated growth. It was also mentioned that the revenue, infrastructure and the operating model are in place to drive further scale benefits.

The following picture provides a broader overview of the total FUA and gross and net inflows:

Platform Services (Source: Company Reports)

Overview of OVH’s Balance Sheet: As can be seen from the below picture, the company’s net cash balance stood at $10.2 million at the end of June 30, 2019. However, it was stated that the net cash would be boosted to around $40 million on the receipt of the final Trustee sale proceeds. The company’s total current assets’ base has witnessed a CAGR growth of 36.54% between the time span of FY15- FY19. The company’s debt has reduced from $6.2 million in FY18 to $0.4 million in FY19. Generally, the reduction to the debt exposure reflects the stability in the balance sheet.


Balance Sheet (Source: Company Reports)

Revenue-Generation Capabilities Might Support OVH: The top-line of OneVue Holdings Limited has witnessed a CAGR growth of 18.22% in the time span of FY15- FY19 which reflects that the company is possessing decent capabilities to generate revenues and this might help the overall company to achieve long-term growth objectives. There has been a turnaround in the company’s cash from operating activities between FY15- FY19 and, thus, it can be said that OVH’s operational capabilities have been improved which could support the targeted growth momentum. Additionally, between the same time frame, the company’s cash receipts have witnessed a CAGR growth of 21.58% and, therefore, it can be said that OVH is possessing decent capabilities to build cash levels. There are expectations that the company’s capabilities to garner revenues and build cash levels might support it in achieving unhindered growth which might attract the attention of the market participants. The reduction in the debt levels and the expected rise in the net cash levels strengthens the confidence in the company’s stable financial position.

What to Expect from OVH Moving Forward: The company’s key personnel have stated that the business happens to be well-placed in order to capitalise on structural and regulatory shifts taking place in the market. Additionally, simplification of the business will support the management to focus on growing core businesses and to continue to deliver further scale and operating leverage. The company stated that delivery of the high growth and a margin uplift would be requiring to execute well on initiatives like Automation and Integration, innovation, scale and increased brand awareness. With respect to Automation and Integration, it was mentioned that, in 2019, they have fully automated and integrated the buying and selling of the custodially held managed funds. The next phase is leveraging new payments platform as well as the ASX block chain in order to further automate transactions on Platform, reducing execution risk and the cost.

With regards to Innovation, the company added that they would trial AI in the customer service centres. There are expectations that they would be rolling out the digital capabilities, like the new online application process throughout the group and leverage the good work they have done in developing the educational and client engagement initiatives through NMP (or No More Practice).

The company stated that its client base consists of banks, trustees and global custodians having high levels of infrastructure and strong security protocols. The company has already invested in scalable technology and security to accommodate the additional clients and transactions.


Key Valuation Metrics (Source: Thomson Reuters)

Valuation Methodology: EV/Sales Based Valuation Approach

EV/Sales based Valuation (Source: Thomson Reuters), *NTM: Next Twelve Months

(Note: All forecasted figures and peers have been taken from Thomson Reuters)

Stock Recommendation: The stock price of OneVue Holdings Limited has witnessed a fall of 22.68% in the span of previous six months while, in the time horizon of one month, the stock has fallen 21.05%. Currently, the company’s stock price is trading towards the 52-week lower levels of $0.365, proffering a decent opportunity for accumulation. Moreover, the company’s balance sheet has been strengthened after sale of Trustee business and, post receipt of deferred consideration amounting to $31 million, net cash would be exceeding $40 million and the Board then intends to shell out a fully franked special dividend amounting to 2.19 cents per share, actively pursue further growth opportunities and consider the buy-back of up to 10% of the capital. Based on the foregoing, we have valued the stock using a relative valuation method, i.e., EV/Sales multiple and have arrived at a target price upside of double-digit growth (in percentage term). Hence, in view of aforesaid parameters and current trading levels, we give a “Buy” recommendation on the stock at the current market price of $0.385 (up 2.667% on 10 September 2019).


OVH Daily Technical Chart (Source: Thomson Reuters)

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