Are these IT Stocks on the Same Side of the Ladder?  – NXT Gains 6.334%, HSN Plunges 7.826%

The S&P/ASX 200 Information Technology (Sector) dropped by 4.71% on 28 February 2020. The last week of February witnessed continued fall in the stock markets worldwide. The S&P/ASX 200 plunged further by 3.25% to close on the last trading day of February.

Following the recent news about the increasing number of coronavirus infected population, stock markets around the world shed huge market capitalization leading to erosion of billions of dollars of investor wealth within a month’s time. Based on the growth potential and track record of earnings expansion of the IT players, investors are looking up to IT stocks for some relief.

Here we shall discuss a few IT stocks listed on ASX and their developments in the period gone by till 31 December 2019.

NXT Reports 8% Growth in Revenue

Asia’s most innovative Data Centre-as-a-Service provider and an ASX200-listed technology company, NEXTDC Limited (ASX:NXT) reported 8% growth in its revenue which reached $97.7 million in 1H FY20 as compared to $90.8 million during 1H19.

Moreover, underlying EBITDA increased by 21% to $50.9 million in 1H FY20 compared to $42.2 million in 1H19, and the operating cash flow increased by 34% to $20.1 million in 1H FY20 compared to $15.0 million in 1H19.

Company Highlights 1HFY20 (Source: Company's Report)

The company’s results are in-line with expectations and FY20 guidance and indicate the inherent operating leverage of the business with the first half being a record period for fresh investments in both:

  • The development of the next generation of world-class Tier IV data centres P2 and S2
  • Innovative connectivity service offerings

During the first half of FY20, NXT achieved a robust level of sales notwithstanding the limited inventory in its key market of Sydney, which the company looks forward to addressing through additional capacity coming online at S2 in the second half of the financial year.

Moreover, the company witnessed strong demand across the national portfolio while being in advanced negotiations related to some large customer opportunities that carry the prospects to significantly and positively influence NXT’s contracted utilisation base.

Other developments in the company’s operations took place in S2 Sydney, where two new data halls being opened, taking total installed capacity to 14MW and in M2 Melbourne, fourth data hall capacity expansion was completed, taking total installed capacity to 10MW.

P2 Perth facility construction remains on track for practical completion in 2HFY20, and the company has gained planning approval for S3 Sydney.

NXT was awarded the 2019 Global Visionary Innovation Leadership Award by Frost and Sullivan in recognition of 2019 Global data centre company of the year.

NEXTDC's third ExpressRoute location nationwide through the addition of a new Microsoft ExpressRoute hosting location at S1 marked the expansion of its footprint of direct hosted public cloud on ramps.

The company’s unchanged FY20 guidance comprises of the following, subject to current billing and contracted utilisation levels and expected new customer contracts in 2H20:

  • Revenue expected to be in the range of $200 million to $206 million;
  • Underlying EBITDA anticipated to be in the range of $100 million to $105 million;
  • Capital expenditure expected to be towards the top end of $280 million to $300 million;

Moreover, NXT looks forward to continuing the enhancements to its go-to-market strategy by way of its channel partnerships with major telecommunications and IT service providers, which shall further allow NEXTDC to actively broaden its selling capability without adding to its sales operating cost base.

Following the announcement of the results, the NXT stock surged 6.334% and settled at a price of $7.890 on 28th February 2020.

The stock has a market capitalisation of $2.56 billion and has delivered 201.94% returns to its shareholders in the five-year period to 27 February 2020.

HSN Revenue Shoots by 28%

A global leader of software and services for the utilities and communications sectors, Hansen Technologies Limited (ASX:HSN) recorded an increase of 28.4% in its operating revenues of $144.3 million primarily driven by the contribution from Sigma after being acquired in June 2019 and underlying EBITDA increased by 19.6% to $34.1 million.

Other financial highlights from Hansen’s performance are as follows:

  • Underlying NPATA moved up by 2.8% to $18.2 million during the period;
  • Adjusted EPS went up by 2% to 9.2 cents;
  • Declared an interim dividend of 3.0 cents per share, partially franked;

Revenue for Hansen ex-Sigma was $3 million lower at $109.4 million from that in 1H19 and with key factors in place such as the closure of a consulting business within Enoro in 2HFY19 and the continued reduction in call-centre revenue in the US, there was:

  • Growth in recurring revenues for 1H20 was $1.2 million
  • A decline in the non-recurring revenues amounted to $4.2 million
  • Fall in the services revenue amounted to $1.0 million

Moreover, the company’s progressive investment in Sales and Marketing has improved HSN’s profile in target markets and further reinforced the company’s long-term customer relationships. Additionally, there has been a continuous investment in HSN’s global infrastructure and products throughout the period which further ensured that the business remains scalable and suitably primed for growth.

The company witnessed a record half-year in terms of new deal signings which includes another recent major signing with Fortum which will use the company’s Customer Information System for deployment at two of its large retailers based in Norway.

Implementation points of Hansen Technologies’ CIS in

  • Aurora Energy in Australia
  • Lumme Energia in Finland
  • Entelios in Sweden and Finland (in addition to Norway and Denmark) and
  • Fortum, the largest electricity retailer in the Nordics, shall now use HSN’s CIS for its two large retailers in Norway

In the communications vertical, the company wins encompass:

  • Deployment by Sigma of a number of products from its portfolio to Airtel in India, SmarTone in Hong Kong and Vocus in Australia;
  • For TDC Group in Denmark, the SaaS deployment of HSN’s convergent billing platform for telcos;
  • Application of HSN’s function-rich pay-TV customer care and billing system for 1Sat;

The operating cash flow generated by the company stood at $18.2 million which was set off by the external debt reduction to the tune of $8.0 million, funding capital expenditure of $10.0 million, reducing lease liabilities of $3.4 million and paying dividends of $4.9 million.

The HSN stock tumbled by 7.826% during the day’s trade on 28 February 2020 and settled at a price of $ 3.180. The Stock has a market capitalisation of $ 683.01 million and has delivered 57.61% returns to its shareholders with a period of five years till 27 February 2020.

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