Midcap ASX Info Tech companies UPDATE

 

There are 10 mid-cap (with market capitalization ranging from $1 billion to $10 billion) Info Tech companies listed on the Australian Securities Exchange (ASX). Note that some technology/ internet enabled businesses, such as Webjet (online travel agency), Iress (financial markets platform) and REA Group (online advertising), are not classified as Info Tech companies [1]. 

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  • Over the past 12 months, Wisetech Global (provider of cloud-based software for logistics industry) had the strongest share price growth. The company increased their revenue by 47% in FY2016 [2] and targets 43%-50% revenue growth in FY2017 [3]. The market value of the company has more than doubled since it was listed on ASX (April 2016).

 

  • Since the beginning of the year, the market value of Xero (provider of cloud-based accounting software) has increased significantly and now exceeds the market value of its competitor Myob. According to Xero it has over 1 million subscribers to its software [4] and the company’s revenue grew by 43%. However, Xero has not generated profit since it went public a decade ago. The company uses funds provided by several venture firms.

 

  • Myob has about 1.2 million customers in Australia and New Zealand and 96% of their revenue is recurring. The company generates its revenue from three segments – SME (Small and Medium Enterprises), Practice Solutions for accountants and Enterprise Solutions for larger businesses. While their competitor Xero has been targeting SMEs globally, Myob reported strong growth of their ERP (enterprise resource planning) segment – it grew by 25% vs 14% revenue growth in the SME segment [5].

 

  • Transition of customers to cloud-based products was a prominent theme in the results released by Technology One [6]. The company launched its cloud-based services in 2012 and reported that this offering is expected to deliver profit of $2.5 million (FY2017) after years of financial losses. Contribution of cloud services to the company’s revenue is expected to increase from about 4% (FY2016) to 7% (FY2017).

 webASXmidcapInfoTechJun2017rev

  • Aconex is a provider of cloud-based software (project management) for construction industry. The company’s ambitious growth strategy is based on effort to replicate ‘the highly profitable Australian business model globally’ [7]. The company reported $9.9 million profit for FY2016 vs $2.5 million loss in FY2015, but their global expansion and profitability have since been negatively affected by a variety of factors. 

 

References & additional info

[1] ASX listed companies are classified in accordance with GICS (Global Industry Classification Standard). GICS definitions are available on MSCI website -> https://www.msci.com/gics

[2] Wisetech FY16 preliminary final report, August 2016

[3] Wisetech Investor conference presentation, May 2017

[4] Xero Financial Results, May 2017

[5] MYOB FY16 Results, February 2017

[6] Technology One Annual Financial Report, November 2016

[7] Aconex FY16 Annual Report

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