MainstreamBPO IPO is set to float on the ASX to raise up tp $10 million. Mainstream BPO Ltd is an Australian services Company focused on enterprise administration.
Behind the USA and Luxemburg, Australia commands the world’s 3rd largest funds management industry. It is one of only a few countries with pension assets worth more than annual Gross Domestic Product (GDP). At the end of FY2014, total superannuation assets were $1.84 trillion, around 116 per cent of GDP.
The largest individual share of these assets are held by self managed super funds, and the remaining two thirds are held by a mix of retail funds, not for profit, corporate and public sector funds. Within these commercial and not for profit segments of the industry, outsourcing is well established with 75% of fund managers and over 80% of large superannuation funds using a third party in their back office. Outsourcing also allows an investment manager to focus on their core competency – investment performance – and accomplish the administrative function more efficiently.
Demand for outsourced services in the wealth management industry is driving the coming listing of Mainstream BPO. In addition to administration services for fund managers, the company provides share registry services for listed companies and funds. Established in 2006, Mainstream BPO is on course to post its fourth consecutive year of profit and third consecutive year of increasing revenue.
Proceeds from its float are scheduled to finance completion of recent acquisitions and reduce borrowings. Incentive for new investors is the company’s potential to sustain recent revenue momentum and increase profitability. Mainstream BPO has recently expanded its geographical reach and service offering, acquiring Hong Kong based middle office service provider, HFO, last year. Whilst the majority of wealth managers currently outsource their back office functions, only 20 per cent outsource their middle office functions.
Principal risks surround the Company’s volatile earnings history and influence of financial markets on its performance. Mainstream BPO’s revenue is linked to its clients funds under management, hence a major deterioration in financial markets could impact its performance. However with its expanded service offering potentially addressing a large segment of unmet demand, the outlook appears well balanced for investors seeking a mix of income and capital growth.
Company: Mainstream BPO Ltd
ASX Code: MAI
Shares on Offer: 25million
Listing Price: $0.40
Market Capitalisation: $34.8million
Listing Date: September 23rd
Author: Tim Morris
Sep 21, 2015
Having studied Commerce and Science at the University of New South Wales, Tim began his career in an analytical capacity with Wise-owl. Tim has conducted over 500 corporate valuations and appraisals, specialising in pre revenue assets and emerging markets. For the last five years, his Equity Capital Market insights have been featured as part of a weekly column in The Australian and regularly features on Sky News, CNBC, ABC and Bloomberg TV.