Are These ASX Tech Stocks Ready for a Repeat Run?

The Tech Sector though having produced big winners has remained underrated by ASX investors. The beauty of the Tech Sector is that while all stocks may not perform, the few that perform can become wealth creators. Such dominance has scope for portfolio diversification.

With the sector stocks undergoing retracement/stabilising after a stupendous run, the following stocks are demonstrating good potential

Gentrack Group Limited (ASX: GTK)

Gentrack Group Limited announced its half-year results for the period ended 31 December 2023 on 20 May 2024. During the period, revenues rose by 21% compared to the prior year, reaching $102 million. Within the Utilities sector, total revenue increased by 17% to $86.5 million. Excluding revenue of $19.7 million from insolvent customers in the previous year, underlying Utilities revenue grew by 60%.

The company saw significant growth in non-recurring revenues, rising by 85% to $28.9 million, driven by major projects commencing during the period, such as new contracts in Saudi Arabia secured in October 2023 and projects with Genesis Energy in New Zealand.

Additionally, wins and upsells from prior periods boosted underlying annual recurring revenues by 49% over the previous year, amounting to $57.6 million.

The company reported an EBITDA of $12.3 million, which aligns well with its FY24 guidance. Net profit after tax (NPAT) for the period was $5.3 million, compared to $7.9 million in the prior year period, which included one-off profits from the exit of a high-margin customer, Bulb.

As of 31 March 2024, Gentrack maintained a cash position of $39.3 million. During the period, the company invested $12.9 million in a 10% stake in Amber, funded partly from cash generated and the remainder from the $49.2 million cash balance at the end of the previous financial year.

The company's significant contract wins and customer upgrades have propelled it onto a robust revenue and EBITDA growth path. As a result, the company has recently revised its FY24 revenue guidance upward from $170 million to $200 million. This adjustment signals promising financial growth for the company in the months ahead.

Gentrack's forthcoming expansion strategy focuses on penetrating five key neighbouring markets in South-East Asia, alongside plans to target over 200 utilities in the Europe and Middle East region. These initiatives are expected to complement the company's current strong financial and revenue growth trajectory, potentially standing to enhance earnings and cash generation.

HiTech Group Australia Limited (ASX: HIT)

HiTech Group Australia Limited declared its half-yearly results for the period ending 31 December 2023.

Despite experiencing a 16% decrease in revenues compared to the prior corresponding period (pcp), the company demonstrated considerable growth in other financial metrics. Gross profit surged by 37% to $6.08 million, while EBITDA saw a notable increase of 27% to $4.14 million. Similarly, net profit before tax rose by 30% to $4.15 million, and net profit after tax experienced an 18% uplift to $2.66 million compared to the pcp. Additionally, HiTech Group Limited declared an interim fully franked dividend of 5.0 cents per share, indicating confidence in its financial position. Furthermore, the company's net tangible assets (NTA) per share saw an improvement, increasing to $0.19 compared to $0.17 in the pcp.

HiTech Group has shown impressive Financial Growth and operational efficiency in recent years. Notably, the company has experienced consistent year-on-year increases in revenue, EBITDA, and Net Profit After Tax (NPAT) since 2020, indicating sustained sales growth and improved profitability.

Moreover, HiTech has demonstrated a rising dividend yield since 2020, emphasizing its commitment to rewarding shareholders. Additionally, its Earnings Per Share (EPS) has steadily increased since 2019, reflecting enhanced profitability on a per-share basis.

The company maintains robust margins and profitability indices, with Return on Equity (ROE) standing notably high at 72.3% and Return on Invested Capital (ROIC) at 61.8%—the highest recorded since 2019. These metrics highlight HiTech's efficient utilization of capital and ability to generate profits from shareholder equity.

Source - Company Reports