Summary

  • In the wake of COVID-19, technology sector took a significant leap with businesses adapting to new technologies, specifically, in tech-enabled segments such as data centres, connectivity, and supply chain.
  • The demand for technology has boosted share price performance of numerous NZX listed tech stocks, experienced improved earnings multiples.
  • In the last six months, Gentrack Group delivered a return of ~84% whereas Rakon Limited and Geo Limited delivered triple digit growth to its shareholders.

Even though COVID-19 pandemic implications have brought the world to its knees, the tech sector entities have experienced outlandish business growth.

The COVID-19-induced business challenges led to a new era of significant innovation in technology usage. Numerous businesses have taken a leap towards adopting remote working culture from physical office-centric culture using audio and video conferencing apps as well as cloud computing services.

In the growing digital era, the technology sector has also experienced heightened demand for cybersecurity, e-learning, e-commerce, digital marketing platforms, digital payments and many more.

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With significant demand for technology based solutions. Many NZX listed tech stocks have experienced price rally and improved earnings multiples.

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On that backdrop, let us quickly gaze through three NZX listed tech stocks witnessing significant price rally.

Gentrack Group Limited (NZX:GTK)

A software company, Gentrack Group’s share price closed at NZ$1.560, on 23 September 2020. In the last six months starting 23 March 2020, the Company has delivered a return of ~84%.

Recently, GTK appointed Gary Miles as Chief Executive Officer of Gentrack, effective 1 October 2020. Gary Miles brings diversified experience in transforming firms and industries via deployment and development of cloud-native technologies as well as services.

On 20 August 2020, GTK also advised that under the Gentrack Long Term Incentive Scheme (LTI Scheme), it had issued 24,105 Performance Rights (PRs) to one of the senior executives for nil consideration.

During the six months ended 31 March 2020, GTK noted total revenue of NZ$50.6 million, down 7% from H1 FY19. The plunge includes a fall in revenue across the UK (7%) and Australia (4%).

Other highlights were as following:

  • The Company experienced a surge of 11% (y-o-y) in its committed recurring revenue and stood at NZ$29.7 million.
  • Underlying EBITDA stood at NZ$4.3 million, in line with the guidance provided in February.
  • The Company experienced strong operating cashflow in H1 FY20 on the back of working capital improvement, especially in the UK

Must read; Trading for the First Time on NZX – 5 Tips for Amateurs

Rakon Limited (NZX:RAK)

A technology company serving telecommunications, defense and space market, Rakon’s share price closed at NZ$0.3950 on 23 September 2020. In the last six months starting 23 March 2020, the Company has delivered a return of ~163%.

On 7 August 2020, Rakon held an annual meeting of shareholders and advised that Rakon weathered the turbulent waves of the COVID-19 and experienced robust group revenue of NZ$119.0 million for the financial year ended 31 March 2020 over NZ$114 million for FY19.

The surged revenue, net profit after tax and underlying EBITDA can be attributed to inflated growth in the telecommunications division and fall in Space and Defence as well as global positioning.

Other key highlights of the NZX listed Rakon’s financial performance for FY20 are as follows:

  • Rakon recorded underlying Group EBITDA at NZ$14.8 million, up from $13.3m in FY2019
  • Rakon’s net profit after tax stood at NZ$4.0 million over N$3.4 million in FY2019

Rakon provided the earnings guidance for FY21 and projected underlying EBITDA to strike amid NZ$16 million - NZ$18 million.

Geo Limited (NZX:GEO)

A cloud-based business productivity solutions provider, Geo Limited’s share price closed at NZ$0.0750 on 23 September 2020, up 11.94% from the previous close. In the last six months starting 23 March 2020, the Company has delivered a return of ~213%.

Geo unveiled its 2020 Annual report for the financial year ended 30 June 2020 on 17 September 2020. Following are the key highlights of the GEO’s business performance:

  • Geo witnessed a YoY plunge of 14.7% in its total revenues which was reported as NZ$4.8 million. The decline was primarily because of a fall in the revenue of Geo for Sales
  • Geo recorded an EBITDA loss of NZ$1.2 million, indicating an improvement of 12.4% from the FY19.
  • The Company experienced decreased subscription revenues of 18.9% (YoY), which was recorded at NZ$99 million
  • GEO’s statutory net (loss) after tax stood at NZ$2.05 million.

The Company did not provide any guidance. However, the focus and pace within the business strengthen Directors’ confidence that growth in business should recommence in FY21, with revenue growth rate to support the amount of incremental capital required to reach cash flow breakeven.

 

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