Silverlake Axis: Plumbing for Banks

Pat Dorsey presented his in-depth investment thesis on Silverlake Axis (Singapore: SILV) at Wide-Moat Investing Summit 2015.

Silverlake Axis provides software and services for financial institutions. The main product is core banking systems, essentially the operating system for a bank. The company dominates Southeast Asia and has a small presence elsewhere. Local bank regulation leads to regional fragmentation. Very high switching costs create pricing power. Silverlake’s founder owns ~65% of shares. The company pays out 100% of FCF and does not hoard cash like U.S. tech companies. The shares trade at a 4% cash return (based on FCF to EV). In Pat’s view, Silverlake’s market price implies zero value for new customer contracts.

About the instructor:

Pat Dorsey is the founder of Dorsey Asset Management. Prior to starting Dorsey Asset, Pat was Director of Research for Sanibel Captiva Trust, an independent trust company with approximately $1 billion in assets under management serving high net worth clients. From 2000 to 2011, Pat was Director of Equity Research for Morningstar, where he led the growth of Morningstar’s equity research group from 10 to over 100 analysts. Pat developed Morningstar’s economic moat ratings, as well as the methodology behind Morningstar’s framework for analyzing competitive advantage. Pat is also the author of two books — The Five Rules for Successful Stock Investing and The Little Book that Builds Wealth — and has been quoted in publications such as the Wall Street Journal, Fortune, the New York Times, and BusinessWeek. Pat holds a Master’s degree in Political Science from Northwestern University and a bachelor’s degree in government from Wesleyan University. He is a CFA charterholder.

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