Latest with stocks in IT space- IRE, CPU, MP1

  • Apr 07, 2020 AEST
  • Team Kalkine
Latest with stocks in IT space- IRE, CPU, MP1

Amid the COVID-19 pandemic, several companies have initiated measures to prevent or minimise the impact on their business, teams and communities. At the same time, few of them have also updated their investors with recent business developments.

Let us discuss latest updates from three IT sector players - Iress Limited, Computershare Limited and Megaport Limited.

Iress Operating and Supporting All Services, Withdraws FY20 Guidance

Technology company, Iress Limited (ASX: IRE) is a provider of software and services for trading & market data, in addition to superannuation, investment management, financial advice, data intelligence, mortgages, and life & pensions. Its software is being used by over 9k businesses and 500k users on a global level. The Company has 2,000+ people based in various regions and countries such as APAC, North America, UK and Europe.

On 7 April 2020, the Company released a market update concerning its business operations and FY20 guidance amid COVID-19.

Business Operations update- Andrew Walsh, CEO of Iress, stated that the Company is continuing to anticipate and respond to the coronavirus crisis while remaining focused on supporting the health and welfare of its people, service continuity to users and clients, and support to the community.

Mr Walsh added that the teams associated with the Company along with the business-critical teams are operating in a remote environment and can continue to function remotely for an extended duration effectively. Meanwhile, the Company is continuing to operate and support all services.

FY2020 Guidance update- Supported by a solid balance sheet and financial position, the Company has strong underlying fundamentals with high rates of recurring revenue and cash conversion. Apart from a strong client base that is diversified by size, segment and geography, IRE has strong underlying demand for automation and technology from financial services.

With its FY2019 results, IRE had provided guidance for FY2020 for segment profit growth. However, now the Company has decided to withdraw its guidance, considering the broader uncertainty surrounding Covid-19 and the economy.

Computershare Revises Down FY20 Earnings Guidance

IT sector player, Computershare Limited (ASX: CPU), founded in 1978 and employing 12,000 people, is a global market leader in transfer agency & share registration, proxy solicitation, employee equity plans and shareholder communications. It also focuses on corporate trust, liquidation, mortgage class action, utility & tax voucher administration, and various other financial & governance services

On 7 April 2020, the Company provided an amended version of FY2020 earnings guidance.

As per the Company, the FY2020 management earnings per share is expected to decline by ~ 20% on a constant currency basis as compared to FY2019, owing to recent changes to the external environment. Earlier, it had anticipated a decline of around 15%.

The impact was also seen in the Company’s margin income and transactional revenues. FY2020 margin income is expected to be nearly $180 million while FY2021 value would be ~ $100 million. The Company at present assumes average client balances to be in the range of $13 billion to $14 billion for Q4 and average cash balance in between $14 billion and $15 billion in FY2021.

Looking at the positive side, the Company’s recurring operating revenue is resilient. It also expects a sharp rise in the Bankruptcy Administration pre filing work along with equity capital raisings activity ramp up.

The Chief Executive Officer of Computershare Limited stated that in the past couple of weeks, the Company has been focusing on the safety of its employees and implementing various methods to lessen the operating risks and ensure delivery of critical projects for the clients worldwide.

 

Image Source: CPU's Report

 

At the same time, the Company also stated that some of the transactional volumes are difficult to predict in this situation. However, there are opportunities in the other parts of the Group along with the strategies to build robust businesses with solid long-term growth possibilities.

Balance Sheet Update - At 31 March 2020, the Company’s net debt to EBITDA leverage ratio stood at 2.20x. The Net Debt to EBITDA leverage ratio is anticipated to be ~ 2.15x at 30 June 2020.

The Company anticipates a drop of $12 million in the interest expense to flow through via floating interest rate reductions for FY2021. Floating debt comprises of bank debt & some US private placement debt. As at 31 March 2020, CPU had $2 billion gross floating debt at an average interest rate of 1.97%.

The Company has a syndicate facility of $450 million, out of which $362 million was drawn at 31 March 2020.

Consistent Increases in All Metrics and Regions for Megaportin Q3

Megaport Limited (ASX: MP1), a global leading provider of elastic interconnection services, on 6 April 2020 reported its quarterly Key Performance Indicators (KPIs) to 31 March 2020 and also provided a global market update.

3Q FY2020 Highlights:

  • Revenue for Q3 FY2020 ended 31 March 2020 stood at $15.19 million, a rise of 10% QoQ.
  • Total monthly recurring revenue for March 2020came at $5.4 million, up $0.9 million, or 19% QoQ.
  • Total Installed Data Centres by the end of the March 2020 quarter was 329. This value represents a growth of 12 centres, or 4% QoQ.
  • Total Enabled Data Centres stood at 601, up 9% on QoQ.
  • Customer base went up by 6% QoQ to a total of 1,777.
  • Total Ports improved by 11% QoQ during the quarter to 5,375.
  • Total MCR increased by 18% QoQ to 268.
  • Total Services went up by 12% to 15,531, of which Virtual Cross Connections soared by 14% during the quarter to 8,529.
  • During March 2020, the Average Revenue per Port increased to $1,008, or 8% QoQ.
  • At the end of March 2020, cash position was noted at $108.7 million.

 

Image Source: MP1's Report

 

Ecosystem Expansion Update:

  • In the Asia-Pacific region, there are 85 Installed Data Centres, and six new sites were included. Total enabled data centres reached 103.
  • In the North American region, there are 158 Installed Data Centres, and five new sites were included. Thus, the count of total Enabled Data Centres reached 331.
  • In Europe, there are 86 Installed Data Centres, and one new site was added in the region. With this, the total count of Enabled Data Centres reached 167.
  • Cloud On-Ramps: There are 171 total connected cloud on-ramps worldwide with the addition of 15 in the quarter which includes: Salesforce in Tokyo, multiple CSPs in Osaka; multiple Oracle expansions in Melbourne, Montreal, Osaka, and London GovCloud; and multiple CSP onramps throughout Europe in the regions like Paris, Stockholm Oslo, & Geneva.

 

Let us gauge through the performance of all the above-discussed companies on ASX on 7 April 2020.


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