Equity Research - Lombard Risk Management Initiation Report

Lombard Risk Management (“LRM” or “the company”) is a UK-based company listed on AIM, operating in the software and computer services business for more than twenty years. LRM focuses on two market segments:

Regulatory Compliance software and Risk Management and Trading software. The company has offices in major international financial centres and serves more than 300 financial organisations including over half of the world’s top 50 banks.

Despite the economic uncertainty still looming over the global markets, LRM’s revenues are showing a strong growth momentum driven by new deal flow in the midst of an active regulatory environment. Notably, several important regulations are expected to become effective by the beginning of or during 2013, providing a positive outlook for LRM. The company is seizing the opportunities in the growing regulatory compliance and risk management markets by boosting its research and development activities and extending its position in the North American market through acquisitions. We expect LRM to continue benefitting from growing regulation- driven demand, international expansion and innovation although increasing competition and an uncertain macroeconomic environment mean that the path to success may not be smooth.

Our valuation, based on a combination of intrinsic DCF-based methods and relative valuation techniques, suggests that LRM’s share should be valued at £0.19. We therefore rate the company a Buy.

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