ASX:GTK
Gentrack Group Ltd
Investment Summary
The fund managers believe Gentrack Group Ltd (GTK) has demonstrated impressive growth and resilience, evident from their upgraded revenue guidance and strong 1H FY23 results. In their opinion, the EBITDA margin has improved to 19%, surpassing management's expectations, and the company maintains a robust net cash balance of NZD $41.9m. Furthermore, GTK's new G2.0 software is now recognized as a competitive product, allowing them to effectively attract new customers and maintain existing ones without any failed implementations. The partnership with Salesforce further strengthens their position, providing best-of-breed customer service alongside billing solutions. With significant opportunities in the renewables sector and expanding operations in South-East Asia, the fund managers view GTK as a low-risk option in a market ripe for disruption. Therefore, despite GTK no longer being a core investment, its growth potential and evolving market landscape merit continued observation.
Commentary From The Managers
Naos Asset Management
31 Dec 2023
$6.20
- GTK's FY23 results showed a revenue guidance upgrade for FY24.
- Underlying revenue growth exceeded 40% when excluding impacts from customer defaults.
- Two years ago, GTK shares were near $1, raising concerns about the need for significant investment.
- The current management has successfully improved GTK's market perception.
- G2.0 is a competitive offering with a strong implementation track record, evidenced by a recent deal with Genesis Energy.
- GTK has yet to experience a failed billing implementation, a critical success factor for enterprise software companies.
- Partnership with Salesforce enhances GTK's offerings by combining best-in-class billing and CRM functionalities.
- The market opportunity is significant, as many utilities are seeking to upgrade outdated billing systems to meet evolving consumer needs.
- GTK is no longer a core investment for Naos Asset Management, but it remains under close observation for future growth potential.
Naos Asset Management
30 June 2023
$3.91
- GTK's 1H FY23 results showed strong performance with management providing upgraded guidance.
- Share price increase from $1.25 in August 2022 to $3.86.
- Standout EBITDA of NZD $16 million, with a margin returning to 19%, exceeding management’s target.
- Net cash balance reported at $41.9 million, indicating strong financial health.
- Results driven by loyalty of legacy customer Bulb Energy, showcasing management's cost control and profitable growth.
- Management upgraded FY23 revenue guidance to $157-$160 million, expecting EBITDA around $22 million.
- GTK's expenses are fully allocated to R&D, providing an accurate cash earnings representation.
- Veovo division saw 27% revenue growth, indicating recovery and potential expansion.
- Management noted a pipeline that has more than doubled, reflecting increased demand in airports sector.
- Long-term focus on scaling Veovo business to enhance competitiveness and customer solutions.
- Renewable energy transformation presents a significant opportunity for GTK to upgrade utility billing platforms.
- Recent operations launched in South-East Asia expanding market reach after wins in Singapore.
- Key focus on upgrading existing clients to Gentrack 2.0 software platform for better efficiency.
- GTK has a strong track record in system implementations, which is appealing to risk-averse customers.
- Importance of having the right personnel and systems in place to manage new work effectively.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.