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Investing.com - According to a recent research note by RBC analysts, Technology One Ltd (ASX:TNE) holds a competitive edge in the market due to its unique business model, robust product offerings, and strong cybersecurity credentials. These factors, coupled with the company's commitment to research and development (R&D), position it for significant growth in the coming years.
One of TechnologyOne's key competitive advantages lies in its cloud ERP system, Connected Intelligence Anywhere (CiA). This system provides users with access to the company's entire suite of products through a single cloud-based solution, offering a level of simplicity and efficiency that stands out in the market.
The company's "Power of One" approach, which consolidates all functions from product development to sales, implementation, and support, resonates with a risk-averse customer base. This approach allows for faster implementation and better relationship management, contrasting with competitors who rely on system integrators for implementation.
TechnologyOne's robust cybersecurity credentials, the highest among any ERP vendor in Australia, add to its appeal, particularly for risk-averse sectors such as Local Government, Education, and Government.
RBC's analysis also highlights TechnologyOne's growth drivers, which include increasing its APAC customer ARR whitespace from ~$2bn to ~$4bn over the next five years and focusing on new logos primarily in the Education Vertical in the UK.
The company's strong balance sheet, estimated to have over $200m net cash by FY24e, gives it the flexibility to pursue mergers and acquisitions (M&A) to further drive growth. In particular, the UK student management space remains an attractive opportunity for M&A.
In terms of market pricing, RBC's forecast sits broadly in line with consensus at the EBITDA line in FY24 and FY25. The firm anticipates that growth in the UK will be accompanied by increased marketing and employee costs over the next few years.
RBC has given TechnologyOne a Sector Perform rating with a $18.00 per share price target, based on a 50/50 DCF and terminal exit multiple valuation. The firm expects a +2% implied total return forecast to the last closing price.
