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MM’s updated views on TNE and NXT please

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MM’s updated views on TNE and NXT please

Hi James and Team, As a recent subscriber I have found your daily and weekend market reports very helpful. The format is easy to read. I would appreciate your views on TNE and NXT please and how they compare with XRO and ALU which you have identified for the MM Hit List. Thank you and regards, Adel


Hi Adel,

Welcome aboard & thanks for the positive feedback, always much appreciated. Firstly looking at the initial two stocks mentioned:

Technology One (TNE)$15.21- We like TNE, we just think it’s expensive for the type of business it is. While they’ve been enjoying increasing demand for their enterprise software solutions which are a major beneficiary of the growing digital transition as companies/Governments upgrade legacy IT footprints, their future growth profile does not justify the ~50x multiple they trade on, in our view.

NEXTDC (NXT) $12.51- The data centre operator delivered a mixed result last month with a strong FY23 more than offset by lower guidance for FY24 i.e. a common theme through the recent reporting season. FY24 EBITDA missed by ~7% which weighed on the stock but they’re simply spending more to take advantage of the opportunity in front of them. We like NXT ~$12.

In comparison to ALU and XJO, they are very different businesses, and we have TNE & NXT behind them in terms of preference.  The reason is that ALU and XRO are true platform businesses, that can grow earnings at a lot higher rate over time, while TNE is more a service  provider while NXT is more digital infrastructure – both don’t scale as well as a platform businesses.

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Technology One Ltd (TNE)
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