Primarily a provider and designer of computer software packages, the company has considerable exposure to the banking and financial sectors, whose capital expenditure and expansion plans may well go into reverse as a result of the credit crunch. This would seriously impact earnings. With a growing lack of visibility over the company's growth prospects, it was sold.
Misys has two software divisions that are global leaders in their respective industries (banking and healthcare). However, the share price has suffered in recent years as margins have fallen to historic lows. We believe that the margin decline does not reflect any problems with the company's products or market position, or any structural issues in the markets it operates in. Instead, the earnings slump has largely reflected mismanagement. The catalyst for our purchase is the removal of a founding director of the company after his abortive attempt to take it private earlier this year. The incoming CEO has a strong reputation within the software industry and a track record of turning around poorly performing companies such as Siebel. Over the next few years we expect the company to produce margin improvements, and given what should remain firm markets for their products, this should provide the backdrop to positive earnings momentum. The share price has yet to reflect this turnaround potential, so we see value at current levels.
| Sedol |
Type |
Price |
Date |
| 0385785 |
Sell |
£ 1.831 |
03/01/2008 |
| 0385785 |
Buy |
£ 2.499 |
07/02/2007 |
| 0385785 |
Buy |
£ 2.145 |
19/12/2006 |
| 0385785 |
Buy |
£ 2.161 |
10/11/2006 | |
