Oracle Financial Services

@Deenar_Toraskar …This was really helpful. OFSS is really far behind other CBS product. Please post more if you have more info. Thanks

It is not that they don’t sell, they have stopped participating in IBSi Sales League. They continue to be number two behind Temenos.

Oracle Banking suite is old iFlex and it is under OFSS. Read AR for better clarity.

Key attractions (already discussed in thread):
They continue to be a play on global financials on not dependent only on US unlike other companies. US accounts for only 25% revenue.

Very high margin product play unlike other service plays.

India has global leadership in banking products.

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@nav_1996 I believe @Deenar_Toraskar is talking about Oracle Banking Platform

Oracle Banking Platform was implemented by some big bank in Australia/NZ…not sure about the bank

Oracle Banking Platform | Oracle

Also i found this interesting article

Please check AR. All products are listed including Oracle Banking Platform.

Obviously for branding purpose they will use “Oracle” rather than OFSS. They are branding towards customers and not shareholders (we are expected to know our company :slight_smile:

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Interesting.

OFSS invested in below

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Looks to be on the way to delisting - the way stock price getting hammered weak hands go out accumulation happening by smart operators! Performance of the Company from the last one year the management is least bothered about results!

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@nav_1996 Thank you,

It is not that they don’t sell, they have stopped participating in IBSi Sales League. They continue to be number two behind Temenos.

Ok, that explains the IBSi numbers. The IBSi Sales League table relies on vendors to report deal wins. It seems they have new customers

Oracle Banking suite is old iFlex and it is under OFSS. Read AR for better clarity.

Ok, have heard different versions. It would be good to get clarity. Assuming this is true for now. The good part is Flexcube is still in the top quartile on all the analyst quadrants (Gartner, Forrester, etc.)

They continue to be a play on global financials on not dependent only on US unlike other companies. US accounts for only 25% revenue. Very high margin product play unlike other service plays.

But zero growth. Revenues in INR have grown at the rate of 4.63 % (CAGR) over the last 9 years, EPS by 6.46% (CAGR) in the past 9 years. If you look at constant currency terms they are taking in less every year. Looks like more customers are leaving/downsizing than new customers are being acquired.

Personally feel here is maybe less downside at this price / valuation. So, just tracking what happens next.

Agree. Looks fairly valued to me if you are looking for a 6.5% yield with a potential for delisting. But I won’t be in OFSS for growth based on the management track record. If they haven’t done any in the last 10 years despite a leadership position in the market why would it be different now?

Looks to be on the way to delisting - the way stock price getting hammered weak hands go out accumulation happening by smart operators!

I am surprised PFFAS who I admire is still holding on.

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It is low growth vs growth elsewhere.

From screener :

Infosys
Compounded Profit Growth
10 Years: 10%
5 Years: 9%
3 Years: 13%
TTM: 10%

Wipro
Compounded Profit Growth
10 Years: 8%
5 Years: 8%
3 Years: 11%
TTM: -7%

So 6.4% is not that bad :slight_smile:

Infy has done some acquisitions and Wipro has done more acquisitions. So some of this growth is bought from market. OFSS has returned all the cash to shareholders.
Organic CAGR of Wipro and OFSS should be very close.

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Decent results. Revenues up 14%. Flat profits as employee costs have increased 20%. EPS of 50. Yearly EPS should be around 205

Positive commentary from Dolat.

Target of 4100 on 15xFY25, If growth picksup with headcount (15%) ramup it may command much higher multiples.

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https://www.fintechfutures.com/2023/01/oracle-flexcube-core-banking-system-gains-new-takers/

in short, Globally OFSS is second largest BFSI software provider after Temenos Inc .Finance sector grow three times of GDP, so BFSI software providers have also huge scope to grow in future.
I read somewhere that every bank in India uses oracle’s software
is it correct ?

A lot of banks use OFSS but there are other players like TCS, Infosys etc. e.g. HDFC uses OFSS whereas ICICI uses Finacle from Infosys

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Decent results. Q revenue up 15% with flat profits.

Ends year with EPS of 208. Dividend of 225.

https://www.equitybulls.com/category.php?id=330557

Now that growth of IT services and OFSS has converged shouldn’t OFSS command a higher PE for sticky high margin product biz compared to IT services?

Update:
Looks like some of the above adjustment has begun to happen

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Gartner comparison with market leader Temenos. Both at par, infact OFSS has small edge.

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This is crazy growth during IT slowdown phase

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I’m going through the financial statements. There is this section. Does this mean ofss potentially owes 21000 million in taxes?

Note 4: Tax litigations
As at December 31, 2023, the Company has certain litigations with respect to tax matters for various
assessment years amounting to 28,355.81 million (March 31, 2023 – 24,434.24 million), which
are pending before various appellate / tax authorities. The management expects that its position will be upheld on ultimate resolution and the possibility of any outflow of resources is remote. Demand of tax payable after adjusting taxes paid under protest and refunds amounts to 20,983.92million (March 31, 2023 – 16,678.50 million) as at December 31, 2023. Further for certain litigations the Company has aggregate provisions of 114.60 million (March 31, 2023 – 874.15 million) as at December 31, 2023.

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Only Dolat capital covers it and has a target of Rs 6260

But my view is this may get re-rated beyond standard valuation framework. As people deep dive and do comparative valuation with other IT companies which have slowed to almost zero growth and are impacted by looming US slowdown, they may be willing to pay a premium for OFSS as it has diversified portfolio of global banks (60% in developing world) and a robust SaaS product portfolio (huge op leverage as license fees compared to headcount services biz).

Still slightly lower than valuations of Newgen/Intellect/Temenos .

Disc: Not investment advice. Too expensive for my taste beyond 4000 :frowning:

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OFSS was neglected stock during 2021 when it was trading below 3200. I do not think that, Analysts were positive about it that time. It was undervalued at that time in my opinion.
Dividend Yield at that time was > 5%.

Hence, do not rely on how Mr. Market perceives the stock. Use your own framework and then Invest.

I also booked profit at 4300 thinking that, it was fairly valued in 2022, and today it is at 6800!
Hence Value investing mostly works over a period of time.

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On technical front, OFSS has broken out of a multi year previous ATH (~ 5000) on high volumes. On fundamentals, they reported a robust revenue and Profit growth of 26% and 70% respectively - compared to years of single digit growth - This seems to suggest something is changing in the company’s structure and/or business outlook.

Despite the recent run up, the stock only seems to be at a trailing PE of ~30. Their parent, Oracle Corp, which is a $320 B behemoth, is trading slightly higher, at 31 (source: Seekingalpha). Of course, they are not comparable as Oracle is a product business while (as I understand), OFSS has a significant revenue from Services. However, even other mid cap IT services companies, with similar or slightly lower return ratios, are trading at double the valuation - Persistent, for example, is trading at PE of 64.

OFSS also has a healthy dividend payout of ~3% even at this price.

Furthermore, all IT companies should benefit as and when there are rate cuts in US, as businesses will start spending more (Impact of GenAI is not fully understood, so I am keeping that out of the equation for now.)

All of this seems to suggest the stock is on a strong footing, from a long term portfolio perspective.

However, I couldn’t find any investor call post Q3 results, and the management doesn’t seem to have had any investor or media interaction in recent times. So, there seems to be very little information in the public domain that could be used for deeper analysis for building a long term view.

I am looking for more inputs from fellow members, and holes in any of my theory or comments above.

Disc: Have taken a technical position, and looking for more data to build a case for long term.

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Thats the problem. They do not have investor calls and no detailed documents either. I am not able to ascertain whether this revenue jump is one time or would it be a recurring revenue now.

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