A Cup of Coffee and A glance at ASX Technology Stocks – WTC, ALU, APX, ALT And XRO

  • Mar 04, 2020 AEDT
  • Team Kalkine
A Cup of Coffee and A glance at ASX Technology Stocks – WTC, ALU, APX, ALT And XRO

After the days of continuous decline on the ASX listed sectors, a ray of hope is finally identified in most of them.

On 20 February 2020, the benchmark index S&P/ASX 200 closed at 7162.50 and dropped significantly on the ASX and reached 6391.50 on 2 March 2020. During this time frame, most of the sectors on the ASX closed in red, majorly influenced by the outbreak of coronavirus.

On 3 March 2020, most of the sectors on ASX are in the green zone, bringing new hope amongst the investors in the market.

So, what! Is the fear of the coronavirus over? The answer is no. As per the data provided by the Director-General of World Health Organisation on 2 March 2020, the total reported case across the globe has reached 88,913 with over 90% of the cases from China and remaining being from outside of China.

What has made sectoral indices improve on the ASX? The answer to this question is the improvement in the US market. As on 2 March 2020, NASDAQ Composite closed 4.49% above its previous close at 8952.17 and S&P 500 by 3.86% or 114 points above its previous close and settled at 3065.10. The stocks of players in the US market like Amazon, Apple, Tesla and Microsoft reported a growth in its share price by 3.73% to US$1953.95, 9% to US$298.81, 11.32% to US$743.62 and 6.65% to US$172.79 respectively.

When we see the S&P/ASX 200 Information Technology sector, the index dropped significantly from 1604.40 on 17 February 2020 to 1287.50 on 28th February 2020, representing a drop of ~ 20%. The sector took a U-turn this week on 2 March 2020 where the sector closed in green. On 3 March 2020, the Information Technology sector closed at 1,331.1, up 2.52% from the previous close, giving a picture that the buyers in the market have become dominant. Thus, there is a positive thrust to the sector.

All stocks under WAAAX, except WiseTech Global Limited, zoomed on the ASX. Let’s look at these players and see how the stocks performed on the day and what made these stocks to respond in this manner.

WiseTech Global Limited

WiseTech Global Limited (ASX: WTC) is amongst the famous technology companies which has provided its shareholders with an increasing dividend since 2017. The company has more than 15,000 logistics companies across the globe as its customers.

Recently, the company released its 1H FY2020 results for the half-year ended 31 December 2019 and delivered a strong growth in its revenues of+31% to $205.9 million, gross profit of +31% to $169.4 million, operating profit by +17% to $42 million and net profit after tax by 160% to $59.9 million.

The company delivered strong results during the period; however, because of the coronavirus outbreak, it is expected that there would be a manufacturing slowdown that would delay execution of logistics activities by logistics service providers.

China contributes to approximately 16% to the global GDP, and the eruption of the COVID-19 is creating an adverse follow-on effect to manufacturing, restricting supply chains along with trading activities around the world.

Thus, the speed of recovery of China manufacturing, refill of inventories globally & restoration of supply chains will result in bounce back of volumes and logistics transactions. Meanwhile, there could be some transactional revenues to move into the following reporting period & possible delay in the launch of new products scheduled for 2H 2020.

Stock Information:

WTC shares have dropped significantly post the release of the result and on 3 March 2020, it further dropped by 2.644% and settled at $16.570.

Afterpay Limited

The shares of Afterpay Limited (ASX: APT) rose by 6.189% from its previous close and settled at $34.66 on 3rd March 2020 after a significant drop in its share price from $39.52 on 17 February 2020 to $32.64 on 2 March 2020.

The company on 27 February 2020 announced its 1H FY2020 results for the period ended 31 December 2019. Total income improved by 96% to $220.3 million and loss after tax dropped 42% as compared to the previous corresponding period.

1H FY20 Highlights (Image Source: APT’s Report)

 

Underlying sales during 1H FY2020 from ANZ, the US and the UK were $3.1 billion, $1.4 billion and $0.2 billion respectively. Active customers from ANZ, the US and the UK were 3.1 million, 3.6 million and 0.6 million. The number of active merchants from these regions were 35.5k, 7.4k and 0.4k, respectively.

In FY2020, the company aims to achieve 9.5 million active customers and exceed its mid-term target of ~ $20 billion+ by FY2022 end.

 

Appen Limited

After a significant drop in the share price of Appen Limited (ASX: APX) from $27.180 on 17 February 2020 to $20.720 as on 28 February 2020, a positive move is seen in APX’s share price from 2 March 2020. On 3 March 2020, APX shares closed at $22.800, up 2.703% from its last close.

On 25 February 2020, Appen released its full-year results for the period ended 31 December 2019, where the company reported an increase in the revenue by 47% to $536 million, underlying EBITDA by 42% to $101 million and underlying NPAT by 32% to $64.7 million. Organic revenue grew 37% to $498.1 million. The board declared a 50% franked interim dividend of 5 cents per share.

The CEO Mark Brayan considers Appen’s outlook to remain positive. The growth in Artificial Intelligence applications are based on deep learning techniques where there is a need for training data for better results.

The company would accelerate growth in new industry sectors ahead of its traditional tech sector customers and in new geographies involving China.

Altium Limited

The shares of Altium Limited (ASX: ALU) slipped significantly by ~ $12 per share in between 17 February 2020 to 28 February 2020. The shares which closed at $42.63 on 17 February 2020 dropped to $30.30 on 28 February 2020. Improvement was seen from 2 March 2020 where the shares started moving in the upward direction. On 3 March 2020, ALU shares increased marginally by 0.031% and closed at $32.01.

On 17 February 2020, ALU released its 1H FY2020 results for the period ended 31 December 2019 and reported strong growth in its revenue by 19% US$92.8 million. PBT grew by 23% to US$31.8 million and the company declared an interim dividend of 20 cents per share.

Earlier Altium expected its full-year revenue to lie in between US$205 million to US$215 million and statutory EBITDA margin of 39% to 40%. However, due to the impact of the Coronavirus in China, the company expects its revenue and EBITDA margin to be towards the lower end of the guided range.

 

Altium is on its way to achieve its 2025 goals for market control of US$500 million in revenue as well as 100,000 subscribers. The company is hopeful that it would be able to achieve 50,000 subscribers by FY2020 end. Further, the company would continue to engage in partnership as well as M&A opportunities to assist its long-term vision of creating a product design & realisation platform that focuses on electronics.

Xero Limited

The shares of Xero Limited (ASX: XRO) made a big come back on ASX on 3 March 2020 where the shares zoomed up by 7.173% and settled at $79.94 after a significant drop of ~ 17.18% during 19 February 2020 to 28 February 2020.

The company delivered a strong 1H FY2020 result for the period ended 30 September 2019 with 32% growth in its operating revenue, a 30% increase in subscribers and a net profit of $1.336 million.

The company would continue to aim at expanding its global small business platform and reinvest the cash generated in order to drive long-term shareholder value.

Conclusion:

WAAAX stocks are the primary movers of the Australian tech sector. The outlook of these companies along with their past performance coupled with strong technology outlook for 2020 and beyond creates confidence amongst the investors.


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