IRESS tipped to win 80% of wealth management market
Morningstar has high hopes for listed technology provider IRESS and anticipates the group’s wealth management software business to increase its market share significantly, driven by strong demand for holisitc financial advice.
In a research noted released this week, Morningstar analyst Gareth James notes that the share price of IRESS has fallen 21 per cent over the last 90 days, despite the lack of trading updates since the group posted its interim results last August.
Over the first half of FY18, IRESS delivered a strong result with group segment profit up 11 per cent and operating revenue up 6 per cent compared to 1H17.
Morningstar’s Mr James believes the weaker share price we are seeing today is more a reflection of general tech stock weakness than any fears over IRESS in particular.
“Over the past decade, the company generated an underlying EPS CAGR of just 2.8 per cent but our valuation assumed a CAGR of 8.1 per cent over the next decade, largely on the expectation of margin expansion, driven by a combination of revenue growth and operating leverage within the wealth management businesses,” he said.
“We expect the narrow economic moat, underpinned by customer switching costs, to help defend the dominant position in Australian financial markets software and enable the Australian wealth management software business to increase its market share to around 80 per cent in the long-term from 65 per cent today.”
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