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Highlights
- Gentrack Group (ASX:GTK) has risen nearly 600% since November 2022, showing impressive growth.
- Fund manager Airlie Funds Management remains optimistic, citing strong long-term potential.
- Gentrack’s mission-critical software for utilities and airports makes its revenue highly predictable.
The S&P/ASX 300 Index (ASX:XKO) has seen a variety of tech stocks come and go, but Gentrack Group Ltd (ASX:GTK) has been on an exceptional run. Since November 2022, the company’s stock price has surged by almost 600%, with investors continuing to flock to the stock amid impressive growth. One expert who remains particularly bullish on Gentrack’s future prospects is Will Granger, portfolio manager at Airlie Funds Management, which has consistently supported the company’s long-term potential.
Why Gentrack Has Delivered Enormous Returns
Gentrack is a global provider of enterprise software solutions primarily aimed at utilities and airports. The company’s client base is impressive, spanning some of the world’s major infrastructure players, including Sydney Airport, Auckland International Airport Ltd (ASX:AIA), London Gatwick, Bristol Airport, Npower, SSE, and many others.
This diverse range of clients highlights Gentrack’s strong position in both the utility and aviation sectors, with its software helping organizations manage customer information, billing, data, and energy management. Given its broad and established clientele, Gentrack has managed to build a substantial and predictable revenue stream, making it a particularly attractive investment for long-term investors like Airlie Funds Management.
Airlie Funds Management Sticks with Gentrack for the Long Haul
Airlie’s belief in Gentrack's potential stems from the company’s ability to sell mission-critical software that is deeply embedded in its clients' operations. As Granger points out, businesses that provide essential software to industries like utilities and airports typically experience very low customer churn. Switching such software can be extremely costly and disruptive, with upgrades costing anywhere between $50 million and $250 million and taking one to two years to implement.
This unique factor makes Gentrack’s revenue model highly predictable and annuity-like, providing a level of durability and stability that many other software companies simply can’t match. The company’s entrenched role in the infrastructure of key industries gives it a significant edge, making its financial outlook more resilient compared to other tech stocks.
The Energy Transition: A Significant Opportunity for Gentrack
One of the most compelling reasons why Airlie Funds Management is so bullish on Gentrack’s future is the ongoing energy transition, which is expected to increase the complexity of energy grids around the world. Historically, energy grids were centralised systems, where power was generated at a large scale and distributed in one direction. However, with the rise of renewable energy technologies like solar panels, electric vehicles (EVs), and batteries, energy grids are becoming increasingly decentralised.
As Granger explains, the decentralisation of energy generation is creating new challenges for utilities, as many of them are still operating on outdated software—some of which is 20 to 25 years old. These legacy systems are no longer fit for purpose in the face of the rapidly evolving energy landscape. This presents a significant opportunity for Gentrack to capture market share by providing software solutions that are capable of handling the complexities of modern, decentralised energy grids.
As energy utilities modernise their systems to accommodate new technologies, Gentrack’s software offerings are perfectly positioned to address these challenges, making the company’s products highly sought after. This opportunity in the energy sector is a key part of why Airlie Funds Management continues to see substantial long-term potential in Gentrack’s stock.
