Financial technology, or FinTech, refers to the business activity of technology stocks that provide software to help financial services providers conduct business with their customers. FinTech stock DH Corp. has completed its acquisition of Fundtech. It is DH Corp.’s ninth and largest acquisition.
DH Corp. (TSX─DH) has completed its US$1.3 billion acquisition of Fundtech. Headquartered in New York State, Fundtech is a leading provider of financial technology to banks and corporations of all sizes in the Americas and the “EMEA” and “APAC” regions; i.e., “Europe, the Middle East and Africa” and “Asia and the Pacific.”
DH believes the Fundtech acquisition will accelerate its growth. After all, estimated annual internet-technology spending by banks for all of the markets in which Fundtech participates is about US$5 billion to $6 billion.
DH Corp. a leading financial technology stock
DH is a leading financial technology—or, in the industry’s jargon, a “FinTech”—provider. Its lending, payments, enterprise and global transaction banking solutions are used by nearly 8,000 banks, specialty lenders, community banks, credit unions, governments and corporations. With more than 5,500 employees and annual revenues of more than $1 billion, it’s recognized as one of the world’s top FinTech companies.
Fundtech has only contributed partial results to DH’s performance this year. Otherwise, DH Corp. (formerly known as Davis + Henderson) has performed well across all of its businesses in Canada, and has enjoyed solid momentum in booking in its U.S. lending solutions business. For the six months ended June 30, 2015, DH made $107 million (on an adjusted basis), or $1.15 a share, compared with $90.3 million, or $1.12 a share, a year earlier.
The increase was due mainly to the inclusion of Fundtech, which is now known as the Global Transaction Banking Solutions, or “GTBS,” segment. Adjusted net income per share was also impacted by additional common shares issued in April in connection with the Fundtech acquisition, as well as additional shares issued late last year.
The GTBS segment accounted for about eight per cent of DH’s adjusted revenue. Overall, DH’s revenue rose 18.3 per cent to $671.7 million, thanks mainly to the GTBS segment. To a lesser extent, it also reflects organic growth in the Canadian division and a strengthening U.S. dollar in the lending and integrated core segment.
DH plans cross-selling growth and acquisitions
Management says the integration of Fundtech is going as planned and that it continues to see strong sales booking activities overall. Though management continues to seek acquisitions as part of its long-term growth and diversification strategy, DH’s focus in the near-term will be the integration of the merged GTBS unit, cross-selling and the reduction of debt. Aside from acquisitions, the company will seek growth by offering existing products and services to its current clients, by adding new clients, and by developing new products and solutions to meet the changing needs of financial services providers.
DH Corp. trades at a reasonable 17 times this financial technology stock’s projected 2015 earnings of $2.28 a share. The current annual dividend of $1.28 a share yields 3.1 per cent. DH Corp. is a buy for a combination of long-term growth and income.
The MoneyLetter, MPL Communications Inc.
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