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HP acquisition plans benefit Mphasis

19 May 2008  |  7014 views  |  0 Financial Graph on screen

HP's planned acquisition of EDS drove shares in Indian outsourcing specialist Mphasis up 18.84% last week. The firm, 62% owned by EDS, led the gainers in a strong week for the Finextra 50 Financial Technology Index, which closed up four per cent to 88.69. i-Flex and Broadridge also saw significant rises while Thomson Reuters shares experienced their biggest one-week gain since the merger completed. S1, Microgen and Bravura were the only companies to buck the trend last week and record significant share price falls.

Mphasis closed Friday up 18.84% on the previous week at Rs246.00, as the market saw the potential takeover of its majority shareholder by HP as a positive move that could provide more growth opportunitites for the company, which counts JPMorgan Chase as its biggest client. The prospect of an open offer for total control of the business and a subsequent de-listing is also generating investor interest, although analysts such as Mehraboon Irani of Centrum Broking believe that any delisting price would likely be at around current trading levels.

i-flex also rose last week, finishing Friday up 13.17% to Rs1409 and continuing its positive run after its May 7 reporting of a 40% year-on-year increase in net profit for the March quarter at Rs1.85 billion. Net revenues were up 12% at Rs6.72 billion.

The company, which derives two-thirds of its revenues from the US and European geography in equal proportion, said it doesn't foresee growth in US revenues given the ongoing credit crisis there, while Asia and Europe are seen growing at a healthy clip.

Broadridge Financial Solutions also finished up last week, closing Friday up 10.61% for the week to $21.68. Its share price has been moving northward since it raised its 2008 profit outlook on 8 May, based on strong sales. However, profit is still expected to be down on last year, with adjusted profit of $1.35 per share to $1.45 per share compared with $1.53 per share in FY07.

Other companies to see significant rises include:

Thomson Reuters, the index's largest consituent by weighting, also did its bit for the index performance. Its shares rose 4.95% last week to 1,655p.

Losers

Only a few companies saw significant falls last week, and among them S1 shares fell the most. It dropped 6.60% to close Friday at $6.65, while Microgen ended down 4.76% to 50p.

Australian software vendor Bravura closed down 4.03% to AUD$1.43, with no news yet on whether CEOs Iain Dunstan and Simon Woodfull can regain control of a 30.5% stake in the company that may have been sold-on in the collapse of domestic stockbroker Lift Capital. Regaining this stake is a requirement for the proposed AUD$272 million management buy out backed by private equity firm Ironbridge Capital.


Index comparison



Methodology
More information on the Finextra50 Financial Technology Index methodology and constituent stocks can be found here.

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