Oracle Financial Services - Annual Report Analysis (Accumulate)
CMP: ` 3,614 (Upside 9%) Market Cap: ` 306bn
OFSS reported revenue growth of 4.8% YoY in FY16; New license revenue in the product segment grew 19.3% YoY and was the key growth driver. Services segment declined 12% YoY as company continues to shift focus towards products. Earnings declined 2.2% YoY to ` 136.8 due to exceptional loss of ` 219mn and higher tax rate (37%).
Revenue growth tad above estimates; negative surprise on margin
Increased global presence: Oracle Financial Services Software (OFSS) has ramped up its global footprint and now provides its product and IT services across 147 countries. Its clients across banking and analytical application offerings have grown steadily. With a process driven approach for service oriented architecture (SOA) deployments, the company offers banks the combined benefit of interoperability, extensibility and standardization. It has also expanded its footprint in countries where leading local banks have adopted the Oracle banking digital experience.
Product Launch: The launch of the Oracle banking digital experience solutions which is a compelling offering that empowers progressive transformation, and helps financial institutions to stay ahead of the digital disruption that is taking place.
Key trends in demand environment: Digital remains a strategic imperative for bankers, to prepare for a future that is changing very fast. Now a day's cloud and fintechs continue to gain greater ground which attracts growth for OFSS as it enables smaller banks to compete with large banks without making capital investments upfront. OFSS is a leading provider of IaaS, PaaS and SaaS which are cloud based offerings.
View
OFSS continues to increase its exposure towards the product segment helped by healthy growth in new license revenue (19.3%YoY in FY16) which contributes 16% of product revenue. Further, growth in implementation revenue (57% cont.. of product segment) continues to remain in weak (6.7%YoY in FY16) as large amount of work is passed on to the partners. OFSS derives 36% of its product revenue from Europe and we believe BREXIT will also have a negative impact in the near term due to delayed decision making by clients; Also, higher dependence on new license revenue remains a concern as a it is cyclical in nature. We maintain our Accumulate rating with a Jun'17 TP of ` 3,925.Valuation
You received this message because you are subscribed to the Google Groups "LONGTERMINVESTORSRESEARCH" group.
To unsubscribe from this group and stop receiving emails from it, send an email to longterminvestorsresearch+unsubscribe@googlegroups.com.
Visit this group at https://groups.google.com/group/longterminvestorsresearch.
For more options, visit https://groups.google.com/d/optout.
No comments:
Post a Comment