Home » Economy » Bank software – Temenos share: Is the 100 franc mark the upper limit? | News

Bank software – Temenos share: Is the 100 franc mark the upper limit? | News

Wednesday, September 13th, 2017 | Economy

Martin Ebner joined Temenos in 2012, a specialist for standardized banking software from Geneva. In the meantime, the major investor has a 15 per cent share. An investment that proved to be a gold hold, as the Temenos share price performance of the last five years shows: price development Temenos share since September 2012, source: cash.ch
In September 2012, the Temenos share was worth almost CHF 15, today it is 98 francs – the title has more than sixfold. And this year, too, it continues to climb steeply: plus 38 percent.
Temenos is a great profiteer of the increasing digitalization in the banking system. Financial institutions need software, that is, computer programs, which simplify account management, lending and payment processing. And that's exactly what Temenos offers.
Analysts full of praise
The latest driver of the share price was the second quarter figures presented in the middle of July. These were received very positively: The strong growth in license income was highlighted above all by analysts. The fees paid by banks for the use of the software are an important source of income for Temenos. According to Z├╝rcher Kantonalbank (ZBK), the expectations for license sales were surpassed by a strong business in Europe and a further increase in the size of new business.
Vontobel analyst Spiliopoulos agreed with the market comment: "Temenos is gradually becoming the provider of banking software, is in full swing and is on a sustained double-digit growth path." At the end of July, Vontobel confirmed the "buy" rating "with high conviction", at a 12-month price target of 110 Swiss francs. Also the ZKB recommends to purchase.
Currently, Temenos is slightly more than 10 percent away from the Vontobel target. Can the Geneva soon another large contract to land – for example, in the USA, where one wants to grow strongly – this should trigger a course impulse upward.
To be too good to be true?
But with all the praise and the rosy prospects, one or the other investor can also be stunned: Has not other companies already predicted a high growth before the big downturn occurred?
One example is the deep fall of the Leonteq share, a provider of structured products. The growth was regarded as almost limitless until the middle of 2015, before the end of the co-operation with an Asian bank led to a massive price drop.
Temenos is already highly valued at a price-to-earnings ratio of 2017 out of 41, and is at the expense of correction if there are sudden negative news. The bank Barclays, which Temenos classifies as "Hold", is cautiously priced at only 70 francs (last update on July 20).
The Barclays analyst is particularly troubled by the unchanged guidance for the full year, which he believes would have had to be corrected due to the good second quarter. For this reason, he is now assuming that Temenos will achieve organic growth in the licensing income of only 5 to 13 percent in the second half of the year, which is well below the 18 percent of the first half-year.
It may be that Barclays is too pessimistic. Because: The management of Temenos is known for stacking rather deeply. The company's internal expectations for the full year could also be significantly exceeded. Temenos does not promise the blue of the sky, so that exaggerated course fantasies do not arise at all. This is likely to dampen the risk of a total crash. Nevertheless, investors should wait to see a correction before they return to Temenos.


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