TEMENOS BUY | CHF143 VS. CHF162 The final choice in favour of subscriptions
TEMENOS BUY | CHF143 VS. CHF162The final choice in favour of subscriptions
We reiterate our Buy rating but cut our DCF-derived target price to CHF143 from CHF162. We have reduced our adj. EPS ests. by 6% for 2022, 5% for 2023, and 3% for 2024, due to Temenos’ announcement to move its business model to subscriptions and FY21 results slightly below expectations due to more service work handed over to systems integrators. In addition, we have increased our company beta to 1.02 from 0.96 on the back of the transition to subscriptions, which will have a negative impact on free cash flow in the short-term but will increase the share of recurring revenues to 85% from 65% by 2025.
Temenos is engaged in the development, marketing and sale of banking software systems. Co. is also involved in supporting the implementation of the systems at various client locations around the world as well as in offering help desk support services to existing users of TEMENOS software systems. Co.'s client base consists of banking and other financial services institutions. Co.'s segments include: Product, which is engaged in marketing, licensing and maintaining Co.'s software solutions, including software development fees for requested functionality, as well as providing hosting arrangements; and Services, which represents various implementation services such as consulting and training.
Since 1996, Bryan, Garnier & Co has been growing with an absolute conviction that the investment banking landscape would experience a major revolution: most of the large local generalist banking groups will disappear to the benefit of a handful of global powerhouses, and an emerging group of independent, highly specialised boutique investment banks.
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