Green&Gold Fund
Recommendation: Buy Fidelity
National Information Services (FIS)
Fidelity National Company
Profile
Industry: Transaction Processing Services
• Leading provider of banking and payment technology
solutions worldwide
• Serves over 14,000 institutions in over 100 countries
• Employs more than 32,000 people worldwide
• 4 Major Segments: Financial, Payment, International,
and Corporate Solutions
• Account & Transaction processing software for financial
institutions
• Risk/Fraud Mitigation Solutions
• Online & Mobile Payment Services
• Prepaid Solutions
Increasing Demand for Mobile
Banking
• Vast opportunity for mobile payment services
• Global mobile transaction value & volume:
• From 2011 to 2012 over 60% increase in value to $170B and a
30% increase in users to 200M
• Expected average annual growth of 42% from 2011 to 2016
• Estimated market value of $617B with 448M users by 2016
• American Express recently chose (FIS) InstantFunds
mobile technology
• Launched PayNet solution used for ecommerce, P2P,
bill pay, mobile, and international money movement
As mobile adoption increases, so
will the threats
• Mobile malware attacks hit record numbers in the Q3
from 28,000 to 175,000
• FIS has been heavily investing in their Risk/Fraud
Solutions
• Already experienced a 100% sales growth with their ID
Authentication tool, which quickly authenticates
identity prior to opening an account and issuing
authorization
• Over 7,ooo institutions use FIS QualiFile to mitigate risk
and automate deposit account origination
Account Processing & Prepaid Cards
• Account Processing is the core infrastructure for
financial institutions and has recently shifted towards
outsourcing
• Vietinbank, one of the largest Vietnam commercial banks
adopted FIS Profile which is a core banking software system to
replace their old system
• Barclays adopted Profile to support the banks new online
savings and CD products
• BMO Harris Bank chose FIS to improve its banking process
• Continued market growth for prepaid solutions:
• Has seen over 80 new prepaid client agreements worldwide
• Processed over 880M prepaid card transactions, totaling more
than $40B in value in 2011
Investment Information
• Revenue was $1.4B in Q3 of 2011 and grew 2.8% Y/Y
• Organic revenue growth is up 5% YTD
• Financial Segment’s revenue alone grew 8.1% Y/Y to $565.7M
• EPS of $0.63 is up 4.1% Y/Y
• Gross margins expanded by 32.6%
• Operating margins increased by 20%
Strong Stock Performance
Prev Close:
36.10
1y Target Est:
52wk Range:
Avg Vol (3m):
Market Cap:
Beta
38.31
23.93--36.13
1,750,610
10.59B
0.75
EPS (Adj):
Div & Yield:
1.82
0.80 (2.2%)
Industry P/E: 10.02
35.26% increase over past year
Forward P/E: 14.34
FIS Compared to Competitors
FIS vs. S&P 500
Investment Thesis
• We should own this stock due to its strong business growth, solid
stock price performance, and the increasing demand for its mobile
banking & risk/fraud mitigation services.
SWOT Analysis
Strengths
Strong stock performance
and business
growth
Solid financial position with reasonable
debt levels
Increasing revenue growth and operating
margins
Opportunities
High growth potential
Increased demand for mobile banking and
risk/fraud mitigation
Increased demand for account processing
and prepaid solutions
Weaknesses
International Solution’s revenue decreased
by 0.7% in Q3
Relies heavily on North American revenue
Threats
Strong competitors
Rapid technology turnover
Self-sufficient financial institutions that
develop and use their own electronic
payment and online banking solutions
Portfolio Placement / Recommendation
•
•
•
•
•
Sector : Financials
Industry Group: Transaction Processing Services
Current Holdings: XLF, ASPS, VRSK, BAC
Target Sector Allocation: 8.86%
Current Sector Allocation: 10.91%
• BUY 138 shares of FIS at market price of $36.10 (approx.
$4,981)