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GFT

Termination of coverage

Update | Technology | 09 Aug 2017

Edison Investment Research is terminating coverage on GFT (GFT). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant.

GFT

Deferrals at largest investment bank customers

Flash note | Technology | 11 Jul 2017

GFT has lowered its FY17 guidance due to delayed decision making at its two largest investment banking customers – Deutsche Bank (DB) and Barclays. GFT said that management changes at the banks have resulted in deferred orders. However, investment banking revenue outside these two customers has been guided upwards, as has the group’s retail banking segment. But these factors were outweighed by the revenue declines at the two investment banks, and management has cut its FY17 revenue guidance by 6% to EUR 425m, while EBITDA comes back by 13% to EUR 42m.

GFT

Q1 constant currency organic growth was 13%

Update | Technology | 12 May 2017

GFT remains on target and thematic trends are broadly the same. Underlying Q1 revenue growth was solid at 13.3%, helped by 3% more days in the period, and management guidance was maintained. GFT's retail banking activities remain buoyant, benefiting from digital banking projects in continental Europe and the group's first retail banking project in the US, while the investment banking backdrop remains challenging, not helped by Brexit and the political changes in the US. With the sustained healthy outlook in digitalisation across the retail banking sector and the prospect of a recovery for the investment banking market (since these businesses need to invest in IT to sustain growth), we believe the shares are looking increasingly appealing on c 13x our FY19e earnings.

GFT

Consolidation in FY17, acceleration in FY18

Outlook | Technology | 31 Mar 2017

While GFT reported FY16 revenues and EBITDA slightly ahead of our forecasts, the shares fell in response to unexpectedly weak FY17 guidance and higher than expected debt. The guidance reflected the challenging investment banking backdrop, which has been holding back profits in the UK and North America. Nevertheless, GFT’s retail banking activities remain buoyant, benefiting from digital banking projects in continental Europe, and management expects group growth to return to trend levels from FY18 on digitisation strength and recovering investment banking markets. Hence, we believe the shares look attractive on c 14x our FY18 earnings.

GFT

Consolidation in FY17, acceleration in FY18

Outlook | Technology | 31 Mar 2017

While GFT reported FY16 revenues and EBITDA slightly ahead of our forecasts, the shares fell in response to unexpectedly weak FY17 guidance and higher than expected debt. The guidance reflected the challenging investment banking backdrop, which has been holding back profits in the UK and North America. Nevertheless, GFT's retail banking activities remain buoyant, benefiting from digital banking projects in continental Europe, and management expects group growth to return to trend levels from FY18 on digitisation strength and recovering investment banking markets. Hence, we believe the shares look attractive on c 14x our FY18 earnings.

GFT

Q3 organic growth remains robust at 12%

Update | Technology | 15 Nov 2016

Q3 numbers were in line with expectations and management has maintained both its FY16 and long-term guidance. The backdrop remains broadly unchanged, with demand for IT projects (predominantly digitisation) in the European commercial banking sector outweighing weakness in the Anglo Saxon investment banking markets. A recovery in the latter is largely dependent on improvements in the financial performance of investment banks. However, we note the investment banking sector needs to invest in IT to remain competitive. Given that the outlook is sustained, we believe the shares are attractive on c 13x our FY18 earnings.

GFT

Consulting and IT services for banks

Update | Technology | 10 Nov 2016

GFT is building a global IT services and consulting business, focused on the growing opportunity in the financial services sector. It is diversifying geographically and broadening its customer base, and we estimate that two-thirds of revenues are recurring in nature. GFT benefits from high levels of IT spending, complex business requirements in the financialservices industry and favourable outsourcing trends in banking. Revenue growth picked up in Q2, despite the challenging banking sector backdrop, as strong demand for digitisation projects in the commercial banking sector in Europe outweighed project deferrals in the Anglo Saxon investment banking markets (though we note this sector needs to invest inIT to remain competitive). Trading on c 12x our FY18e EPS, the stock looks attractive on strong earnings momentum and attractive business drivers.

GFT

Underlying organic growth expands to 19% in Q2

Update | Technology | 15 Aug 2016

Revenue growth picked up in Q2, despite the challenging banking sector backdrop, as strong demand for digitisation projects in the commercial banking sector in Europe outweighed project deferrals in the Anglo Saxon investment banking markets. Consequently, management edged up revenue guidance but eased profit guidance. Management expects investment banking IT activity to recover in H2 or FY17, as the sector needs to invest in IT to remain competitive. We have lowered our EPS in FY16 and FY17, while FY18 is broadly maintained. Given that management's long-term outlook is sustained, we believe the shares are attractive on c 14x our FY18 earnings.

GFT

Q1 constant currency organic growth was 7.6%

Update | Technology | 06 Jun 2016

GFT reported a solid Q1, with constant currency organic growth of 7.6%. This was slightly below the long-term trend, as the group saw some deferrals in Anglo Saxon regions due to poor results in the investment banking sector and uncertainty relating to the imminent UK vote on the EU. Nevertheless, management expects orders to pick up later this month and in Q3, regardless of the outcome of the BREXIT vote. We have edged our forecasts up with the inclusion of Habber Tec Brazil, which GFT acquired in early April. In our view, if management can continue to maintain the momentum, the stock looks attractive, trading on c 17x our FY17e EPS.

GFT

FY15 was another year of healthy growth

Update | Technology | 21 Mar 2016

FY15 was another year of solid growth at GFT, with organic revenue growth of 18% at constant currencies. This was achieved in spite of the turmoil in the European investment banking sector, as participants needed to invest in compliance projects and outsourcing trends remain favourable. In our view, if management can continue to maintain the momentum, the stock looks attractive, trading on c 18x our FY17e EPS.

GFT

De-rating provides an opportunity

Flash note | Technology | 11 Feb 2016

GFT's shares have fallen sharply recently, tracking a steep fall in Deutsche Bank's shares, along with broad declines across the banking sector. We note that Deutsche Bank generates c 40% of GFT's revenues. At the time of the Q3 results, GFT said it expects stable revenues from Deutsche in FY16, with the growth coming from other parts of the business. GFT is on Deutsche's strategic partner list, and GFT handles complex IT projects for Deutsche, along with maintenance of its core business. Competition in this space is low. The IT area at risk in the case of cost-cutting is the commodity IT business, which GFT is not involved in, and is mostly handled by large IT service providers (including the India-based majors). GFT's shares traded at c €32 in early December and, in the wake of the share price de-rating, now look significantly more attractive, trading on c 15x our maintained FY17 earnings.

GFT

Strong Q3 with guidance increased

Update | Technology | 23 Nov 2015

GFT continued to grow apace, with organic revenue growth (excluding Rule Financial) of 19% in Q3. Margins continued to expand with the adjusted operating margin rising by 100bp to 11.0% over Q2. While FY15 growth has mainly come from investment banking, the pipeline for 2016 is focused on several large retail banking projects. Given management's increased guidance, we have upgraded our EPS by forecasts by 2% in FY15 and 4% in FY16 and FY17. In our view, if management can continue to maintain the momentum, the stock still looks attractive, trading on c 22x our FY16 EPS.