IRE - IRESS Limited

[Basilisk]

I've seen the online trading software Webiress mentioned a few times in ASF and I'm wondering if anyone has shares in the developer Iress Market Technology.
Friday it closed over 3% higher after their half yearly report.

 

[GreatPig]

Re: IRE - Iress Market Technology

I've had some in the past, and was looking at buying again earlier this month. However, I was waiting for them to go a bit lower but they went up instead, so I'm still waiting

GP

 

[kermit345]

Nutmeg just mentioned IRE in the TGA thread and its a company I really like the look of but agree with Nutmeg that it is overvalued. Can't believe it hasn't been discussed here since 2006.

I'm just curious what other people have as their valuations and where they would be willing to buy. IRE to me seems like a company that rarely even approaches its valuation and its even more rare for it to drop under it. My valuation is around the $6.00-$6.20 although thats just back of the envelope as i'm at work at the moment.

Interested to see where people consider it good buying as I think its a great company to take a long term holding in. I work in the finance industry and we use IRESS software (Xplan) and its brilliant. It's also to see how they can make a motza from it as all the additional modules cost aditional licensing fees etc etc.

I feel that anything under $6.00 is starting to represent a real opportunity for making an entry into IRE and just interested in the thoughts of others. In my view its the kind of company you'd almost be willing to give up a bit of MOS if the price doesn't look like dropping any further.

thoughts?

 

[Nutmeg]

I'd want to see IRE go below $5 before I even think about buying. Personally, I think there is a good chance that it will fall below that figure.

If you look at IRE's most recent announcements, they are very gloomy - "neutral outlook on revenue, segment profit declining at a rate exceeding H2’11 decline", ongoing capex in its start-up operations in the UK.

If you are patient and can get IRE below $5, it would be a good buy in my view and one to hold for the long term. I'm just watching and waiting.

 

[kermit345]

Thanks Nutmeg for the input, I agree that it needs to be monitored for a little longer given the recent decline in earnings etc.

If nothing major changed in their operatings and they continued their historical growth before the most recent hiccup then $5.00 would be a great entry price long term.

Certainly a stock thats on my radar, will be watching with interest.

 

[McCoy Pauley]

I bought into IRE when it was just above $7.00/share earlier this year but sold out when IRE downgraded its profit forecast by 10% for the current financial year.

Seemed to maintain a fairly constant ROE over the last 10 years and I like the fact that it makes much of its revenue from recurring sources (licence agreements, in particular). Not so sure that I like the expansions into foreign markets, though.

Still keeping an eye on it, but probably won't enter it until the price drops a fair amount more.

 

[skc]

Thanks Nutmeg for the input, I agree that it needs to be monitored for a little longer given the recent decline in earnings etc.

If nothing major changed in their operatings and they continued their historical growth before the most recent hiccup then $5.00 would be a great entry price long term.

Certainly a stock thats on my radar, will be watching with interest.

FWIW I use their WebIress for the last 3 years and nothing has changed that I can see. Disappointed with them on the product innovation front.

However, keep in mind that the WebIress is just their cheap and nasty retail platform and may not be on their development focus at all.

Also, it seems to me that at least some of their earning is tied to the market activity level, which in turn is tied to the bullishness of the market. Volume tends to shy away in volatile / bearish markets (at least as far as brokers are concerned).

 

[McLovin]

I bought Bridge DFS on the float in 2000 and sold it back in about September '06 (along with most of what I had in the market at the time). IRE looks like a bit of a value trap, IMO. The justification for the price seems to revolve around even though the market isn't doing that well the wall of money that flows from superannuation will eventually have to find a home outside of cash. That maybe true, but super funds, because of their size, are buy and hold types, and IRE needs transactions and volume. What we saw last decade is was an outlier and will not be repeated.

The realtively small size of the Australian market means it's probably pretty unlikely a serious competitor will try and challenge IRE's market share. So it's pretty safe from that perspective.

Just my

 

[kermit345]

I haven't really investigated with a huge amount of depth into what makes up Iress' revenue but by the sound of these posts its the trading side of their systems?

In our office we don't use it for any trading at all, we simply use it as a database tool firstly, and then use its various modules for client modelling, insurance quotes, portfolio tracking all with datafeeds etc.

As i've only worked with this company I can't comment on other programs/tools like Xplan, but it seems to cater to almost everything a financial planner needs to do. All the additional modules have additional costs involved and i'd be interested to know how much revenue comes from the Xplan package for IRESS. I know for sure the group i'm involved with love Xplan, its flexibility and would be paying for a large number of licenses.

 

[Nutmeg]

IRE looks like a bit of a value trap, IMO.

A value trap is a big call. I associate value traps with something more than the risk that a stock will potentially grow at a slower rate (or at no rate) than shareholders have previously been accustomed to.

Rather, value traps are, as Jim Chanos has explained about FMG, a stock which, should something external happen like iron ore prices decline, would be at risk of suffering a liquidity event and thus need to undertake a capital raising or some other remedial action which would fundamentally reduce or destroy shareholder value.

I can't foresee anything in the short to medium term that would fundamentally reduce or destroy shareholder value in IRE.

 

[McLovin]

A value trap is a big call. I associate value traps with something more than the risk that a stock will potentially grow at a slower rate (or at no rate) than shareholders have previously been accustomed to.

PE compression can lead to a permanent loss of capital if your anticipating higher growth than materialises.

 

[Nutmeg]

PE compression can lead to a permanent loss of capital if your anticipating higher growth than materialises.

That's a risk inherent in any stock. But it would seem to imply that you're anticipating a contraction of IRE's business and/or earnings power. As I see it, there are few small cap stocks in the ASX that so dominate their market and enjoy a high barrier to entry as to enable them to raise prices as IRE. Quite apart from the changeover costs for those contemplaiting switching from IRE's systems, those systems really have no competitor in Australia.

 

[McLovin]

That's a risk inherent in any stock. But it would seem to imply that you're anticipating a contraction of IRE's business and/or earnings power. As I see it, there are few small cap stocks in the ASX that so dominate their market and enjoy a high barrier to entry as to enable them to raise prices as IRE. Quite apart from the changeover costs for those contemplaiting switching from IRE's systems, those systems really have no competitor in Australia.

Not at all. They don't need a decline in their business for their PE to come down, just a little less blue sky in the valuation. There's no doubt they have a very strong position and very high barriers to entry but that doesn't necessarily mean they should be trading on 15x 2011 OCF.

 

[Ves]

Not at all. They don't need a decline in their business for their PE to come down, just a little less blue sky in the valuation. There's no doubt they have a very strong position and very high barriers to entry but that doesn't necessarily mean they should be trading on 15x 2011 OCF.

Agree. Waiting until the P/E is much lower before I look at this company properly. Same with CPU.

 

[McLovin]

This is presentation is from last week.

http://asx.com.au/asxpdf/20120517/pdf/4269zwj22pz2yl.pdf

Slides 21 and 22 tell you all you need to know about this business at the moment. Note their use of the phrase "challening environment in global capital markets prolonged". I have no idea when that challening environment will cease but certainly it's going to keep a lid on revenue while it persists.

 

[Nutmeg]

There's no doubt they have a very strong position and very high barriers to entry but that doesn't necessarily mean they should be trading on 15x 2011 OCF.

Agree.

 

[Ves]

Closed under $6 for the first time in a long time tonight. Starting to struggle on a technical level, definitely needs to retreat a bit as discussed above. Priced for healthy growth at the moment and in reality it will struggle to match that in the next few years. Perhaps this is the omen that will start the price capitulation. Canoz or tech/a might be able to tell us some more about that.

 

[JTLP]

Closed under $6 for the first time in a long time tonight. Starting to struggle on a technical level, definitely needs to retreat a bit as discussed above. Priced for healthy growth at the moment and in reality it will struggle to match that in the next few years. Perhaps this is the omen that will start the price capitulation. Canoz or tech/a might be able to tell us some more about that.

I've had this one on my radar for over a year now - watching it slip slide from $7 to where it sits today.

I read on HC that someone thought $5.75 was a real possibility (basing it on profit downgrade and P/E) but I think this needs to be priced down further as technically it's in a long downtrend...

 

[McLovin]

I've had this one on my radar for over a year now - watching it slip slide from $7 to where it sits today.

I read on HC that someone thought $5.75 was a real possibility (basing it on profit downgrade and P/E) but I think this needs to be priced down further as technically it's in a long downtrend...

I reckon $4 is a possibility over the medium term. Then it starts getting interesting.

 

[Ves]

I reckon $4 is a possibility over the medium term. Then it starts getting interesting.

Yeah, depends on profit. Honestly hard to say what P/E it would be on if it got to $4. Either earnings take a fair hit or it over-corrects (probably best scenario for us).