Bravura Solutions Ltd (ASX: BVS) shares are starting the month with a bang.
In morning trade, the ASX All Ords stock is up over 7% to $1.23.
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Why is this ASX All Ords stock racing higher?
Investors have been buying the wealth management software solutions provider's shares this morning in response to the release of announcement.
According to the release, Bravura is in the enviable position of having too much cash on its balance sheet.
The ASX All Ords stock notes that as a result of its March 2023 capital raising and the scale and pace of its transformation, its Board has determined that the business is overcapitalised.
As a result, the Bravura board is proposing a return of capital to shareholders up to $75.3 million. It feels that these funds are surplus to the company's long term capital requirements and appears to believe they would be better being distributed to long-suffering shareholders.
Despite today's gain, the ASX All Ords stock is down almost 70% over the past five years.
What's next?
The release notes that distribution is subject to required approvals by Bravura shareholders at the annual general meeting (AGM) and the receipt of any ASX waivers sought. In addition, it will be subject to a favourable Australian Taxation Office (ATO) draft class ruling confirming the Australian tax implications of the proposed distribution for shareholders.
Management advised that the company has commenced the process of engaging with the ATO on the proposed distribution, and will be seeking a class ruling from the ATO to confirm the Australian tax implications.
If required approvals and waivers and a favourable ATO Class Ruling are obtained, shareholders are expected to receive their payments within three months of the AGM.
Prior to today, Bravura had a market capitalisation of approximately $513 million. This means that its capital return would have a yield of approximately 14.7% based on yesterday's close price.
Should you invest?
Although it has not yet responded to this news, one broker has been tipping this ASX All Ords stock as a buy in recent months.
That broker is Shaw & Partners, which currently rates Bravura as a buy with a lofty $1.70 price target.
Based on its current share price of $1.23, this implies potential upside of 38% for investors over the next 12 months.
Its analysts have been impressed with the company's successful turnaround. They note that its cost reductions have surprised to the upside and supported a rapid improvement in cash generation.
