Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Readytech (RDY) and IPH Limited (IPH) are two companies that a number of brokers have as buys or strong buys with significantly higher share price targets. I believe RDY is or was recommended by MM. However their share prices continue to underperform. Your thoughts would be appreciated, including whether these are short-term issues rather than longer term concerns. Many thanks
Hi Mark,
ReadyTech Holdings (RDY) – the student and workforce management software company isn’t travelling too badly, up 3% in January testing 5-month highs in the process although it has largely been treading water since December 2022 when Pacific Equity Partners (PEP) withdrew its A$514 million takeover bid for RDY at $4.50 per share. Following the withdrawal, PEP indicated it was working on an alternative proposal, but as of now, no further developments have been publicly disclosed.
One of the biggest issues for RDY is liquidity. We think the share register on RDY is an issue, with another private equity player (Pemba) holding 30% of the stock. More liquidity would improve the trading performance of RDY we think. RDY remains solid value trading on ~23x for FY25 after the company reported steady growth in both revenue and profitability during FY24.
IPH Ltd (IPH) – This patent business has halved over the last 2-years with the business facing ongoing headwinds from a weakening in its Asian business, particularly in the intellectual property (IP) markets of China and Southeast Asia. Challenges in maintaining growth in its Australian operations is also weighing on sentiment due to uncertainty around future earnings and dividends. Lastly, and very topically AI is set to be a major disruptor across intellectual property which cannot be good for IPH, its feeling simply dated.
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