Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
HI MM, Can you share your view on OCL. It is an IT firm, but its client and software is mainly targeted to Government related services. Do you see growth in OCL as based on Government contracts? Do you see other areas of growth? And if MM is interested in OCL? Thanks, Jacky
Hi Jacky,
For subscribers not familiar with Objective Corporation Limited it’s a $1.1bn Australia-based business that provides content, collaboration, and process management solutions to the public sector.
The market is generally positive on the stock with Barrenjoey and Shaw Buy equivalents, Jefferies/Goldmans neutral. All like the business and the trends that are playing out with earnings tipped to steadily increase over the coming years. It’s not a hyper growth stock but profits are set to average around ~10% growth, the variable is just around the price to pay for those earnings. The stocks priced for this growth trading on 35x for 2024 with the safety aspect of government contracts supporting its valuation, and it seems to be growing into that multiple.
Overall, it’s hard for us to be anything but neutral with the stock unchanged over the last 2-years, a period when many tech stocks have been hot. The founder Tony Walls remains CEO/Chair and major shareholder with ~65% of the stock. A sell-down from the founder to improve liquidity would actually be a good thing in MM’s view and perhaps the catalyst to see a bit more activity in the SP.
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