Crealogix Holding AG (SIX:CLXN) has established a strong track record of delivering software solutions to the banking industry in Switzerland and is transitioning the business to international markets. FY18 numbers were below expectations, mainly due to the faster than anticipated switch to SaaS, which spreads out revenue. International revenues represent 57% of the total (50% in FY17). CREALOGIX acquired the 80% remainder of Elaxy BS&S in July, have acquired Innofis to target the Middle Eastern markets earlier this year. The stable, cash-generative nature of Elaxy BS&S balances the higher-risk, stronger growth profile of Innofis. Given the attractive industry dynamics, and with CREALOGIX ideally positioned to capitalise on these, the shares look attractive on c 21x our FY20e EPS.
Digital banking is in a very strong growth phase
Global digital banking is in a major growth phase, boosted by increasing use of smartphones and tablets, and pressure on banks to streamline their branches to reduce costs. These factors, along with regulatory requirements such as PSD2, are driving increasing spend on front-end systems by CREALOGIX customers. Gartner forecasts that global front-end system spend will rise to c 50% of banks’ total IT spend by 2020 from c 10% in 2010.
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