4 Small-Cap Tech Stocks that Look Promising- TNE, IRE, DDR, EML

  • Jun 16, 2020 AEST
  • Team Kalkine
4 Small-Cap Tech Stocks that Look Promising- TNE, IRE, DDR, EML

Summary

  • Technology emerged as a saviour for businesses and individuals amid social distancing and self-isolation measures triggered by COVID-19.
  • Several small technology companies are grabbing opportunities with changing working style and behaviour.
  • Small-cap technology stocks like TNE, IRE, DDR and EML have been performing well, with growing customer base and traction for their product offerings.

Amid this gloomy period caused by the COVID-19 pandemic, technology sector evolved as a saviour, supporting various businesses to sustain and people to operate from remote locations while making efforts towards reducing the coronavirus spread. Cloud computing, IoT and FinTech are some of the segments that are playing a crucial role amid the global pandemic.

Technology sector could be the best bet at the moment Must Read

Owing to COVID-19, many technologies, software, and applications, came into limelight. The period came as an opportunity for even small tech companies that are supporting businesses as well as individuals with their product offerings. The best part is that many of these small-cap companies are looking forward to long-term growth and upside potential.

Let us discuss four ASX-listed technology sector players with a market cap less than A$3 billion, which have made significant announcements in the recent past.

TechnologyOne Limited (ASX:TNE)

TechnologyOne Limited is one of the largest enterprise SaaS companies in Australia and amongst the top 200 ASX-listed companies with offices across six nations. The Company also offers services including customer support, consulting and application managed services.

Continuing Growth for TNE in 1H FY2020:

The Company, in its 1H FY2020 or six months ended 31 March 2020, reported a 6% growth in net profit after tax, on the back of continuing strong demand for the TechnologyOne Global SaaS ERP Solution. Revenue increased by 7% to A$138.4 million and SaaS annual recurring revenue went up by 33% to A$110.2 million during the period. TNE declared a dividend of 3.47 cents per share, representing an increase of 10% when compared with the same period a year ago.

Activities Amid COVID-19:

  1. Amid the COVID-19 pandemic, Scottish Fire & Rescue Service (SFRS), which is the world’s fourth-largest fire and rescue service, experienced maintaining a 24/7 emergency response. Early in the year, the organisation had shifted its primary finance solution to TNE’s SaaS solution, CiAnywhere, as part of its plan towards digital first. TNE supported SFRS, ensuring that they maintained services to assist their 24/7 emergency response.
  2. Queenstown Lakes District Council boosted its ability to provide critical frontline community services online, by going live with TechnologyOne’s Strategic Asset Management software remotely.

 

Iress Limited (ASX:IRE)

During FY2019 (period ended 31 December 2019), Iress, a provider of software to the financial services industry, registered growth of more than 10% in group revenue to A$508.9 million as compared to the previous corresponding period (pcp). Growth in revenue was primarily attributed to strong underlying performance in the UK and Australia.

Group segment profit went up by 10% to A$152.1 million while NPAT for the period was A$65.1 million, a growth of 2% on pcp. Final dividend for the period stood at 30 cents per share.

Acquisition of OneVue:

On 01 June 2020, Iress announced to have reached a Scheme Implementation Agreement with OneVue Holdings Limited (ASX:OVH), to acquire 100% of the outstanding shares of OneVue for A$107 million. The acquisition of OneVue would support the Company’s strategy to continue to generate long-term growth opportunities, leveraging technology & automation, while aiding its customer base to achieve growth, efficiency and compliance.

Equity Raising Program:

On 1 June 2020, Iress announced the roll out of an equity raising program, targeted towards strengthening its balance sheet as well as aiding the OneVue acquisition. On 2 June 2020, the Company completed a A$150 million placement of ~ 14.4 million new fully paid ordinary shares to institutional and sophisticated investors at an issue price of A$10.42 per share.

On 9 June 2020, the Company announced the launch of a Share Purchase Plan, under which eligible shareholders would be able to subscribe for ~$30,000 of new fully paid Iress ordinary shares.

Software Provided by Iress:

  • Financial advice software, which is trusted by 9,000 businesses, globally. The software, catering to 100,000 users worldwide, supports the complete advice process, while bringing together advisers and clients and aiding the management of business operations & risks.
  • Trading and market data help to trade smartly with relevant information, tools as well as support.
  • Investment management helps in enhancing performance with the software aiding to maximise every decision, streamline reporting, keep costs down, and monitor and manage risks.

 

Dicker Data Limited (ASX:DDR)

Dicker Data Limited, a top computer hardware distributor based in Sydney, during Q1FY2020 ended 31 March 2020 reported an increase of 19.9% in total revenue to A$463.9 million. PBT went up by 36.3% to A$18.4 million. Subsequently, the Company experienced strong performance for April 2020, with total monthly revenue reaching AU$163.7 million, up 37.7% year-on-year, driven by significant mobilisation to remote working solutions.

Equity Raising Program:

On 7 May 2020, DDR announced an equity raising program to strengthen its balance sheet as well as support its long-term growth goals. The funds would be used partly for financing the Company’s new distribution centre construction project and continuing investment in Dicker Data Financial Services.

 

 

On 8 May 2020, DDR completed its A$50 million placement and issued ~7.5 million new shares and on 4 June 2020, the Company completed SPP to raise A$15 million.

EML Payments Limited (ASX:EML)

Payment card technology solutions provider, EML Payments Limited experienced use of its solutions in multiple countries during the COVID-19 pandemic.

Financial Highlights for 9 months ended 31 March 2020:

  • Gross Debit Volume improved +55% to AU$9.83 billion.
  • Gross Profit margin stood at 75.9%, compared with 73.7% in the same period a year ago.
  • Revenue for the period was A$87.1 million, up +20% on pcp.

 

Strategic Focus:

  • The long-term strategy of the Company is to deliver revenue and earnings diversification, via strategic acquisitions and organic growth.
  • The Company recently acquired Europe-based PFS (Prepaid Financial Services), with the combined group expected to be amongst the biggest FinTech enablers in open banking as well as prepaid worldwide. The acquisition would support in revenue diversification, broaden solution suite, customer diversification and revenue mix. Further, the acquisition would bring scale to the existing European operations, allowing more operating leverage.

 

Below table highlights the above-discussed companies’ stock information, on ASX as at AEST 02:46 PM on 16 June 2020.  

 


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