After my last quicky on Sino AG, which owns shares in Tick Trading Software (TBX), I decided to take a closer look at Tick TS …
This is not investment advice. Please read the disclaimer.
I might currently or at a later point in time own shares (economic interest) in mentioned or related companies.
Tick Trading Software AG is a German 27 m€ market cap software development firm and software-as-a-service provider. The company develops front office solutions for trading and risk monitoring tools. Clients consist of banks and financial service companies. The German investor presentation from Dec 2019 conveys a solid business performance. I believe it is worth to take a closer look at tick TS, based on the following quick facts:
- Trailing P/E of 16x or 14.2x based on fwd mid-point projection
- High dividend payouts: € 1.61, 1.30, 1.14, resulting in
- a high dividend yield of 6% based on a price of € 26.8 (Sept 24)
- (see investor presentation p. 10 for a longer history of rising dividends)
- long history of rising sales
- Younger generations prone for (mobile) trading
The shares (TBX) trade at the exchange Duesseldorf (Germany) since May 2017. The share price was around € 16 until mid 2019 when it traded upwards until Dec. A stronger upward movement took place since March 2020 (rising from € 16.50 to € 30 in August). This is due to higher trading activity leading to higher expected results due to load-dependend fees. The traded volume is very thin.
Solid development
Tick TS shows a very solid performace over the last 10yrs (financial year is from Oct – Sept). The company grew sales (Umsatzerlöse in k €) very consistently. Recurring revenues made up € 4.8 m or 78% in FY 2017/18 after 4.3 m in the prior year (+11.4%). The company operates a profitable business for many years, proven through growing equity (Eigenkapital) despite paying out high dividends to shareholders.
On Sept 23, Tick TS yesterday released ad-hoc news. Tick TS estimates to reach record profits of €m 1.85-2.05 (prior: 1.6-1.9) for the FY 2019/20, ending Sept 30. Better results should be due to corona effects:
- Clients deferred IT projects and investments, which resulted in lower project income and related license revenues. The first effect was offset by
- higher load-dependent revenues fees due to increased volatitlity levels during Q1 (corona)
The company has a very solid balance sheet, as well. As of March 31, 2020, Tick TS had € 2.5m cash and almost € 1.4m receivables on its balance sheet and only liabilities of less than € 0.4m.
Are you interested in a bigger software company with a fortress balance sheet? You might find it here!
Outlook
Based on the above, I feel this is a rather solid and profitable business. But, for an investing the future is the interesting (and important) part. A quote from Pat Dorsey comes to mind
All of the information is in the past, but all of the value is in the future.
Pat Dorsey
I can imagine a bright future for Tick but a continuation of the current trend would be just fine, I guess. In general people are in need of alternatives to holding cash due to low to non-existent interest rates. Younger people are prone to use more modern services for investing their hard earned cash in ETFs and other products. This could be a long term tailwind. Additionally, many banks need to catch up on modern digitized services. This is true internally and externally, i.e. offering apps to its customers. I use TradeRepublic since January for monthly ETF investments (I wrote about it here and here).
If you are interested in the TradeRepublic app and want to open an account please use my personal referral link to receive € 15 after your first trade. I will receive € 15 as well.
Tick provides white label apps, according to their presentation, which could drive future growth. In the very near term, Tick will offer services to clients as an alternative for Bloombergs SSEOMS, which will cease in Apr 2021. So I believe growth opportunities are there.
Instead of discussing potential risks I will write a pre-mortem (read more here in Food-for-Thoughts #11) that I already used for another detailed company analyses (which is not yet public), but I think this is a great method to incorporate …
I bought shares of Tick Trading Software in 2020, after the price was up 30% yoy, based on hopes for much higher global trading volumes. These hopes were spurred by daily reports about bored amateur traders using the (gamified) Robinhood app. After five years I lost half my investment and ask …
What happened? In the years 2021 and 2022, Tick TS invested strongly in capabilites (apps) to serve new market segments of thousand of millennial traders, so active you can only dream of as a service provider. But these hopes turned out to be merely dreams and never became reality. Other players served this customer segment. Traditional clients, incl. key customers as HSBC, started to save on new IT projects and were not able to catch significant market share in new segments. Only a few new customers were onboarded for the alternatives to former Bloomberg functions. After corona, financial market volatility was very much subdued, lowering trading activity and margins. Some key personnel left the company. Remaining executives and employees signed off significant salary increases and bonuses for themselves, resulting in margin deterioration. Thus, even moderatly growing sales did not result in higher earnings and dividend payments freezed on 2020 levels.
Conclusion
I believe chances are good that Tick Trading Software will deliver above average returns (growing dividends) to its investors for many years. However, it is a very small company with regard to market cap as well as to number of employees (key person risks) with associated special risks (and opportunities). That is why I will, if at all, only invest a small amount.
I placed a buy order for € 24 and hope to get lucky building a small position at lower prices than today, after a pop due to the positive ad-hoc news (record profit).
After finishing this quicky, I googled a bit. I found a transcript of a capital market presentation from Dec 11, 2019. It is only available on German, but I liked what I read.
30. MKK 2020 – tick Trading Software AG (youtube video)
searching 4 value 
Hi, one comment to your pre-mortem: I personally see no big rusk in developing apps that are not much used, as they only develop if a customer asks and pays for a product.
But I see a significant risk in sino as a top customer that is struggling and shrinking over time – it could well be that sino disposes its complete stake and then decided to stop investing in the own brokerage. As this investment is done via tick ts, tick ts might lose quite some revenue. But when this happens I hope that trade republic is big enough to make up for this.
By the way, there is also a post on my blog with some notes from the 2020 AGM : https://www.preis-und-wert.com/hauptversammlungsberichte-abo-wind-und-tick-ts/
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Hi Tobi. Thx again!
Reg. the pre-mortem: I have the same view. I include hypothetical reasons (even if deemed unlikely) in the pre-mortam. But much better (higher) margins occur if apps are developed and sold to several clients. Developing is reimbursed by clients if they wish/need new features etc., but manpower (costs) coudl stay longer (hard to get) …
From your write up: ‘Das Wort „gerne“ legt nahe, dass es uns nicht immer gelingt, die gesamten Entwicklungskosten auf Kunden abzuwälzen; wichtig ist schon mal zu verstehen, dass wir keine Produkte auf Halde entwickeln’
Sino is a risk, yes!
I also see a lot of potential from TradeRepublic via HSBC & L&S. Do you know if there is a direct relationship Tick TradeRepublic (liest sich so in deinem link – danke auch dafür!) Ok, weiter unten gefunden (finde ich +++): ‘Kundengewinnung/ Verlust: zwei kleine Kunden verloren; neu: Trade Republic, Bethmann, Hauck und Aufhäuser, Lloyd Fonds, Euwax, Bundesbank’
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