Is The Tech Boom Continuing? A look At Three IT Stocks- WTC, XRO And ALU

Is The Tech Boom Continuing? A look At Three IT Stocks- WTC, XRO And ALU

Starting from 2 January till 22 August 2019, the return of S&P/ASX 200 Information Technology (sectoral index) was 24.78% vs S&P/ASX 200 whose return during the same period was 16.98%. It represents that the IT sector has performed better than the standard S&P/ASX 200.

Starting 2 January 2019, the S&P/ASX 200 Information Technology index has moved in the upward direction and on 30 July 2019, it reached the maximum level of 1429.90. However, the next day the sector reported a sudden fall and till 6 August it reached a lower level of 1278.40. The sectoral index closed at 1320 on August 22, 2019.

The impact of the sectoral up move was witnessed in three IT stocks which we will discuss below.

 

WiseTech Global Limited

WiseTech Global Limited (ASX: WTC), the leading developer as well as provider of software solutions to the logistics execution industry has seen a significant increase its share price by the closure of the day’s trade on 22 August 2019. The closing price of the shares on 22 August 2019 was 6.925% above its previous closing price, and it stood at A$32.890.

On 22nd August, 2019, shares opened at a price of A$31.350, with a gap up of A$0.59. The highest price of the share recorded for the day was A$33.690. The market cap of WTC on 22 August 2019 was A$9.79 billion with approx. 318.18 million outstanding shares, the annual dividend yield of 0.11% and a PE ratio of 173.790x.

On 21 August 2019, WiseTech Global Limited released its FY2019 results for the year ended 30 June 2019. WiseTech reported strong results in FY2019. Its revenue increased by 57% y-o-y to $348.3 million, operating profit by 37% y-o-y to $80.2 million, net profit by 33% y-o-y to $54.1 million and EPS by 27% y-o-y to 17.7 cents per share. The company’s dividend also increased by 18% to 1.95 cents as compared to the corresponding prior-year period.

The key performance indicators of the performance of WTC in FY2019 includes:

  • WTC generated 99% of its recurring revenue through its CargoWise One platform.
  • The annual attrition rate was less than 1% by the customers of CargoWise One.
  • EBITDA increased by 39% to $108.1 million.

The growth in revenues was driven by the organic growth of the global business of the company. It also includes the addition of more than 830 enhancement and upgrades in the internally developed products along with the addition of new features to the CargoWise One technology platform. Other than that, the company also made the acquisition of strategic assets in new locations along with adjacent technologies to drive its growth in the upcoming period.

The company stepped up product development in China, Italy, Germany, Brazil, Ireland, the US, and Australasia. It also made investment of resources into machine learning, process automation, natural language processing followed by guided decision-making.

Guidance for FY2020:

The company expects its FY2020 revenue to be in the range of $440 million – $460 million and revenue growth in between 26% – 32%. EBITDA is expected to be in between $145 million – $153 million and EBITDA growth to be in the range of 34% – 42%.

Xero Limited

On 22 August 2019, the stock of Xero Limited (ASX: XRO), a provider of online accounting software for small businesses,  closed at A$62.430, 0.287% lower than its previous close. The highest price attained by the shares for the day was A$63.510. The market cap of XRO by the closure of the trading session was A$8.85bn and there are approximately 141.3 million outstanding shares.

Recently on 15 August 2019, Xero Limited released a presentation for its annual meeting. In the presentation, Chairman, Graham Smith informed about the retirement of Bill Veghte as the Director of the company.

For the year ended 31 March 2019the company achieved positive free cash flow. The financial and operating metrics improved during the period. Xero completed the issue of convertible notes worth US$300 million. The fund raised through these convertible notes provides the company with financial flexibility where it can improve as well as extend the small business platform and ecosystem via targeted acquisitions.

In FY2019, the company reported a 31% increase in the number of subscribers to 432,000 subscribers in FY2019. It represents the strong traction of the business and strong progress in the global market. International net new subscriber additions were 239,000 during the period.

The operating revenue of the company in FY2019 increased by 36% year over year and it reached $552.8 million. EBITDA increased by $42.0 million year over year and reached $91.8 million by the closure of FY2019.

Lifetime value, or LTV, is considered as the key metric across XRO’s business as it helps in decision making on where and how to make an investment. In FY2019 LTV per subscriber increased by 3% year over year (in nominal terms) to $2,398. To know more about FY2019, click here.

 

The Annual meeting also considered:

  • Fixing the remuneration of the auditor.
  • Re-election of Susan Peterson as a director.
  • Election of David Thodey as a director.
  • Increase cap on non-executive director remuneration.
  • Approval of the issue of shares to a director – Lee Hatton

Altium Limited

Electronic design software company Altium Limited (ASX: ALU) had seen a 0.557% growth in its share price by the end of the day’s trading on 22 August 2019. The stock closed at a price of A$36.100 with a market cap of A$4.69 billion with approximately 130.51 million outstanding shares, an annual dividend yield of 0.95% and a PE ratio of 62.060x.

On 19 August 2019 released its full-year result for the FY2019 ended 30 June 2019. The company during the period was able to achieve outstanding revenue growth across all business units in all important regions by 23% year over year to US$171.8 million. The net profit of the company increased by 41% year over year to US$52.9 million and EPS by 41% over the year-ago period.

There was also an increase in the new Altium Designer seats of 27% over the year-ago period. The subscription base went up by 13% to exceeding 43,600 subscribers. China delivered strong growth in revenue of 37% year over year. All the business units delivered double-digit growth in revenues. The growth in China expanded beyond Shanghai and Shenzhen to Beijing. The company also released Altium Designer 19 with additional features to cater to advanced design and complex projects. It also released the beta version of a new cloud platform Altium 365. Octopart delivered 49% growth in revenue followed by TASKING at 37%. There was a 42% increase in the operating cash flow to US$69.1 million. The final dividend declared for FY2019 was A$ 18 cents per share.


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