Fidessa’s Results In Asia 2009
Fidessa PLC reported impressive full year results on February 15 despite a tough 2009. The company as a whole reported revenue with 63% generated from the sell side, 19% from connectivity, 11% from market data and 7% from the buyside (LatentZero/Capstone/Sentinel). Given the small but growing (38% year over year) portion of total revenue that Asia represents (13.7%) its likely this breakdown doesn’t hold but is probably not far off. Fidessa has 3 business segments referred to as Hosted, Enterprise and LatentZero. Let’s take a look at what happened in Asia.
Hosted, the largest business segment of the group, saw growth all across Asia. They signed CCB International Securities Limited (CCBIS), the Hong Kong-based securities trading subsidiary of China Construction Bank. Mirae Asset Securities also from Hong Kong was added to the Fidessa family citing scalability and advanced trading tools for its choice. Mito Securities was an interesting win as it is a local firm in the Japanese market. Any software vendor will tell you that getting that first sale to a local player is very difficult but once that mountain is crossed closing business in that country becomes less challenging.
On the buy side they signed up LIM Advisors in Hong Kong who manage around USD900 Million. This was there 20th LatentZero client in Asia which represents only 10% of their global buy side customers. Lots of upside to be realized in Asia here.
Adding to Fidessa’s global connectivity in 2009 was RHB Investment Bank, one of the leading brokers in Malaysia and the Corporate and Investment Banking arm of the RHB Banking Group. In Japan Fidessa also connected to Kabu.com Securities Company, a Japanese proprietary trading system (PTS – a darkpool for the rest of you). Samsung Securities also joined its global connectivity network after having implemented Fidessa’s fully managed and hosted Asian trading platform for its newly established Asian investment banking operations in Hong Kong. Fidessa also began offering Hong Kong equities through Instinet’s CBX ASIA extending their agreement from Japanese stocks. Incidentally, Instinet and Samsung provide KoreaCross, a Darkpool in Korea, and it shouldn’t be long before Fidessa will offer access to this venue too.
Last year also saw the introduction of BlueBox, Fidessa’s fully-integrated algorithmic trading engine, to its hosted Asian trading platform for the sell side. BlueBox provides easy access to pre-built, industry standard algorithmic strategies along with a toolkit for clients who wish to build and offer their own proprietary models.
Headcount increased by 47 (161 for the group) in Asia including the new Managing Director of APAC, Jean-Pierre Baron, who has over 20 years experience in the trading application space and was most recently with Sungard. Globally, they added 71 bodies to their technical teams and 36 to management and administration likely to support the growth in the complex and diverse Asia market. They reduced sales by 2 bodies overall and will likely ramp this up in the coming year or two especially in Asia.
The Asia zone achieved around a 36% profit margin compared to 20% for the group. I suspect that the European operations are baring some of the cost of supporting Asia (76 new head counts last year) as it ramps up what looks to be a promising area for Fidessa. The company has no debt, pays a dividend and even declared a special dividend signaling to the market that cash flow to the firm will be constant or growing in the medium term
The changing regulatory environment that is slowly opening up Asia will offer greater opportunities for hosting, order management, routing and diverse connectivity venues. The growth in wealth and sophistication in Asia and its subsequent investment management industry will see regional players demanding greater global access and to spread the risk of thier trading destinations. Fidessa with its global connectivty, product offering and good capitalization stands to be well positioned to ride that wave.