Fundtech Ltd. (Nasdaq: FNDT; TASE: FNDT) has risen 27.3% since New Year’s without any obvious reason. The company has announced no new deals or contracts; indeed, it has made no announcement at all since mid-December 2006, except to say that it will publish its financial report for 2006 on February 13.
Nonetheless, a number of factors have come together to explain the rise in the share price. Sources inform ''Globes'' that one of them is a likely large contract with a leading European bank, which is due to be signed soon. Market sources said that Fundtech makes $10 million a year from its two largest customers Citigroup Inc. (NYSE:C) and HSBC plc (LSE:HSBA; NYSE:HBC).
Fundtech develops secure real-time automated clearing and payment processing solutions for banks and financial institutions. The company was founded by CEO Reuven Ben-Menachem.
The European Central Bank is now instituting a new standard, the Single Euro Payment Area (SEPA), an integrated retail payments market, and Fundtech is helping its customers prepare for it. The company is also pursuing its hosting business.
Market sources believe that Fundtech’s growing business will cause it to hire new employees for its R&D center in Israel. The dual-listed share was relegated from the Tel Aviv 100 index in January, which caused the share to fall 10.7% on the TASE in December, and this may be one reason for the subsequent correction.
Another reason for the rise in Fundtech’s share are good financials by electronic payment and invoice solutions provider, Bottomline Technologies Inc. (Nasdaq:EPAY). Market sources equate the two companies, and good results or, alternatively, a profit warning by one company affects the share of the other. Bottomline published its financial report for its second fiscal quarter, ending in December, on January 24, and its share has subsequently risen by 24%. Fundtech has risen 12.3% since Bottomline published its financials.
Analysts predict that Fundtech will have double-digit growth in 2007, after growing by 27% in 2005 and 13.5% in 2006. It is expected to post a pro forma profit of $8.1-9 million ($0.51-0.57 per share) on $84.5 million revenue for 2006. Market sources believe that the company will beat the analysts’ forecasts.
Fundtech’s spokeswoman declined to comment to the report.
Published by Globes [online], Israel business news - www.globes.co.il - on February 5, 2007
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