Are these 3 Popular Stocks in the overvalued zone - HUB, TNE, WTC

  • Nov 27, 2019 AEDT
  • Team Kalkine
Are these 3 Popular Stocks in the overvalued zone - HUB, TNE, WTC

Various factors in the global business environment are promoting the uncertainties in the international financial markets, compelling the investors to keep a closer watch on their investment portfolio.

Some investors tend to follow Warren Buffet’s investment style of cherry-picking undervalued stocks to enhance stock returns. Investors looking for short opportunities tend to look for stocks trading in the overvalued zone i.e. trading higher than their intrinsically fair market value.

Let us walk through some popular stocks listed on ASX and operating in the financial and information technology sector of Australia.

HUB with a PE Multiple of 96.710x

The HUB24 Limited (ASX: HUB) stock traded at $11.350, closer to its 52-week low price of $10.130 on 27 November 2019 (2:00 PM AEST). In the last one month, the stock has decreased by 10.07%.

The HUB stock has a quite a high price to earnings multiple of 96.710x and low annual dividend yield of 0.41% (as per ASX) as per compared to industry figures.

TNE with a PE Multiple of 47.590x

Moving to the next popular stock on ASX, TechnologyOne (ASX: TNE) traded at a price of $9.0 on 27 November 2019 (2:00 PM AEST), close to its 52-week high price is $9.395. The stock has delivered 16.80% return in the last one month.

The stock is trading at a PE multiple of 47.590x and the annual dividend yield of 1.36% (as per ASX).

WTC with a PE Multiple of 150.280x

Australian IT player, WiseTech Global Limited (ASX: WTC) traded at a price of $26.770 with a market capitalisation of $ 8.46 billion on 27 November 2019 (2:00 PM AEST). In the last three months, the stock has decreased by ~20%.

The stock has an Annual dividend yield of 0.13% and a very high price to earnings multiple of 150.280x (as per ASX) as compared to industry figures.

HUB24 recorded decent FY19 financial performance

Let’s gear-up with the discussion on HUB24 Limited, which engages in delivering innovative solutions that create opportunities and connect the advisers with their clients. HUB lays emphasis on the delivery of its HUB24 platform and the growth of its wholly-owned subsidiaries:

  • Paragem Pty Ltd (a financial advice licensee),
  • Agility Applications Pty Ltd, and
  • ConnectHUB Pty Ltd (provide data, reporting and software services to Australian stockbroking and wealth management market);

HUB has maintained its position as the fastest growing platform in the market (in percentage terms) and has attained a compound annual growth rate (CAGR) of 76% in Platform revenue over the past five years.

HUB witnessed record growth of 94% (pcp) with net inflows of Funds Under Administration amounting $1.2 billion in the first quarter of FY20.

The Underlying EBITDA increased 30% to $14.8 million with statutory NPAT of was $7.2 million for the financial year ending June 2019. The strong financial performance ensured the total unfranked dividend for the year to 4.6 cents, including interim dividend of 2.0 cents (paid in April) and a final dividend of 2.6 cents (paid in October).

HUB believes that the future Australian Wealth Management industry is transforming, and it is well placed with its products, technology and client services to draw benefits of positive tailwinds and the significant opportunity for further growth.

TechnologyOne reported 208% increase in Net Profit

IT player, TechnologyOne Limited is Australia's largest enterprise Software as a Service (SaaS) company with offices located globally across six countries. TNE engages in transforming business and customers (1,200 leading corporations, government departments and statutory authorities) by providing powerful, deeply integrated enterprise software that is extremely easy to operate.

Lately, TNE reported continuing strong growth in profit fuelled by the continuing fast growth of the TechnologyOne SaaS ERP solution during the financial year ended 30 September 2019.

Key highlights from TNE’s performance during the year are (on AASB15 statutory basis):

  • Net Profit Before Tax of $76.4m, up 208%;
  • SaaS Annual Recurring Revenue (ARR) of $102m, up 44%;
  • Revenue of $286 million, up 13%;
  • Expenses of $210m, down 9%;
  • Cashflow Generation of $45m, down 14%;
  • Cash and Cash Equivalents of $105m, up 1%;
  • Total Dividend of 11.93cps, up 8%;
  • R&D investment of $60m before capitalisation, up 11%, representing 21% of revenue.

TNE’s performance during the year

Mr Edward Chung, CEO TechnologyOne, commented:

Our global SaaS ERP solution is delivering a compelling value proposition for our customers providing them any device, anytime access from anywhere around the globe as well as a simple and cost-effective way to run their enterprise”

WiseTech Global on track for FY20 guidance

Another popular player in the Australian Information technology sector is WiseTech Global Limited - a leading developer and provider of software solutions to the global logistics execution industry, forming an integral link in the global supply chain through its flagship platform, CargoWise One.

WiseTech executes over 50 billion data transactions annually, and is relentless about innovation, by adding approximately 3,500 product enhancements to their international platform in the past five years and making a significant persistent improvement to the world’s supply chain.

As per WTC’s recent Chairman address, the business continued to experience strong growth with revenues up 57% to $348.3million, and NPAT increasing to $54.1million during FY19.

The company’s ongoing dividend policy is to target a dividend payout ratio of up to 20% of NPAT, boasting its robust balance sheet position.

Last month, WTC had requested a trading halt to ensure that trading did not take place in the presence of floating misinformation in market about WTC. WiseTech rejected all the claims pertaining to financial impropriety and irregularity that were floating in the market without prior inquiry

Commenting on the incident, WTC’s Founder & CEO Richard White said:

“We are very concerned that claims in this Report may mislead and manipulate the market to the detriment of WiseTech's business and our shareholders”

WiseTech confirmed to be resolute in its vision to be the operating system for global logistics and continue to strengthen the hold on its strategy, technology and business model, which together provide the push for significant growth and global expansion of WiseTech.

Moreover, WTC also affirmed its FY20 guidance for

  • Revenue of $440 million - $460 million, with revenue growth of 26% -32%;
  • EBITDA of $145 million - $153 million with EBITDA growth of 34% - 42%;

Apart from checking the respective valuation of stocks, investors should also look at company’s recent financial performance and developments in business operations, before taking sound and rational decisions.


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