MM’s updated views on TNE and NXT please

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)

LAST UPDATED 22/09/2023 15:23

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Technology One Ltd (TNE)

LAST UPDATED 22/09/2023 15:23