The New Capital Swiss Select Equity Fund

Biggest outperformer
Temenos

The company

 

Banking software specialist Temenos has a strong, well-executed business model. As the leading third-party software developer for banking solutions, it benefits from the banking industry’s current mass migration to software.

 

Although other sectors have already switched to solutions like SAP or Oracle, most banks still run their own mainframe backbone. These are often more than 40 years old and cost a small fortune to maintain.

 

With new entrants such as PayPal or Apple Pay nibbling at their high-margin business, the business case for switching to a third-party vendor like Temenos makes a lot of sense for most banks. There is typically one big tech winner in any sector and with win rates of close to 100%, Beck’s money is on this company.

 

Performance

 

Temenos’ focus on software development rather than integration means the company benefits from strong operating leverage. The high R&D spend of 20% is spread across 2,000 clients. Guidance on the EBIT margin is 1% to 1.5% growth per year.

 

After an initial licence fee, the yearly upgrade typically comes with a 10-year contract, a charge of 21% of the licence. This maintenance fee provides good visibility and contributes to the high valuation. The stock contributed 18 basis points to the Fund in the last three quarters of 2014, was the top contributor at 1.84% in 2015, and contributed 1.44% in 2016. Since 2014 returns on the stock have grown over 150%.

 

The structural case for the company makes it one of the best in the Swiss stock market. So even with demanding valuation multiples, Beck retains his strong, high-conviction position on the company.

  • Fund details

    Fund manager: Urs Beck

    Inception date: 13 March 2014

    AUM: CHF 122m

    Base currency: CHF

    Price reporting Financial Times, Bloomberg, Micropal, Lipper

    Benchmark/reference index:
    Swiss Performance Index

    Investment manager: EFG Asset Management (UK) Limited

    Subscription/redemption:
    Daily 16.00 (Irish time)

    Accounting period: 30 June

  • Share class details

    Inception date: 13 March 2014

    NAV: CHF 150.35

    Management Fee (pa): 0.70%

    Minimum Investment

    • Initial CHF 5,000,000/Subsequent CHF 1,000,000

    Dividend (for income classes):

    Identifiers

    • ISIN: IE00BJFL7248

    • Bloomberg Code: NCSSEFI ID

Temenos stock performance

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Temenos management

 

The management team has seen internal moves but been very stable overall. In 2012, the CEO became the chairman, the CFO became CEO and the head of M&A moved to CFO. The team knows its product and the market inside out, and are trusted by their big bank customers.

Data as of 30 April 2017