With the onset of the new decade, one thing that is certain is that both cloud adoption, including everything-as-a-service, and artificial intelligence (AI) will continue to dominate the headlines worldwide as companies increasingly adopt these technologies and embrace flexible consumption through both hybrid and multi-cloud environments.
At the backdrop of this global trend, Australia-based software and services company, K2fly Limited (ASX: K2F) has outperformed the market index S&P/ASX 200, on the Australian Securities Exchange, in the Year-to-date, perhaps owing to a phase full of business developments that continue to drive the company forward.
As on 12 December 2019, K2fly has a market capitalisation of around AUD 18.38 million with approximately 81.69 million shares outstanding. The K2F stock has generated a year-to-date return of 60.71% vis-a-vis 24.41% return generated by the S&P/ASX 200 and 32.50% return by the S&P/ASX 200 Information Technology Index in the same period. This demonstrates that K2fly has also comfortably beaten both the benchmark indices S&P/ASX 200 Information Technology and S&P/ASX 200.
K2F vs S&P/ASX 200 vs S&P/ASX 200 Information Technology YTD return (Source: Thompson Reuters)
What does it mean for a stock to outperform the market average? Essentially, it implies-
- The stock has delivered a better rate of return than similar companies.
- Investors are bullish on the future prospects of the company
In addition, K2F’s 1-month, 3-month and 6-month returns stand at 18.42%, 32.35% and 50% respectively.
On 12 December 2019, K2F settled the day’s trade session at AUD 0.210.
Looking back, K2fly acquired the RCubed Resource Governance Software Solution in early May 2019 and closed the same on 3 June 2019, which marked a turning point from where K2F’s stock embarked on an upward trend and continues to do so. The investors welcomed the news resoundingly and the stock price rallied by as much as 52% in a matter of two weeks, making an interim top at AUD 0.190.
With new major clients consecutively signed on board, the journey with RCubed has been extremely rewarding for the company as it expanded and strengthened its SaaS based offering, which initially comprised Infoscope, targeting the Resources sector.
The key RCubed implementation contracts signed over the last few months include-
With the company’s main focus on achieving high-margin SaaS revenue, the RCubed deals have been revenue accretive for the business. On 29 October 2019, K2fly announced its Operations Update for the quarter ended 30 September 2019 (Q1 FY20). After the Q1FY20 results, the stock price broke out of the range and went on to make a yearly high of AUD 0.230 on 2 December 2019, delivering the shareholders a handsome return of 53%.
The company delivered a significant improvement of 44% in the invoices raised to $ 1.43 million in Q1FY20 from 991k in Q1 FY19. During Q1 FY20, the company’s ARR from Software Subscriptions increased by 27%, resulting in a CAGR of 150%. In addition to onboarding new SaaS clients, the company also actively delivered consultancy services to Tier 1 clients and eyeing more opportunities.
The demand for RCubed solution, in particular, has been unprecedented following the regulatory changes introduced by the SEC in the United States (US) along with the retirement of in-house systems used by Tier 1 and Tier 2 miners listed on the New York Stock Exchange and globally. With the signing of Rio Tinto, the Total Contract Value (TCV) rose sharply by 159% in November 2019 to more than AUD 2 million and the trend is expected to continue with further multi-year contracts in the pipeline. The company is well-poised for rapid growth as the company continues to accrue higher margin SaaS revenue through Infoscope and RCubed and move towards achieving its goal of positive cashflow.
With a fantastic year so far and continued business momentum on the domestic as well as the international front, K2fly has delivered an early Christmas present for its shareholders.
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