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Here’s why the Gentrack Group Ltd share price is going nuts in 2017

The Gentrack Group Ltd (ASX: GTK) share price has climbed slightly higher today following a promising update from the company.

Gentrack Share Price

ASX:GTK

Source: Google Finance

Who is Gentrack Group?

Gentrack Group is a $340 million software business specialising in developing solutions for energy utilities and airports. As can be seen above, the New Zealand company has grown strongly in recent years.

Since the company’s products are ingrained in client systems and processes, Gentrack’s revenue is relatively stable. This allows it to pay a dividend of 2.7%. 

Why is the Gentrack share price flying higher in 2017?

Gentrack shares have risen strongly in recent months following the acquisition of Junifer Systems in the UK and other promising updates. Today, Gentrack’s share price is trading higher following the announcement of two acquisitions, including:

  • CA Plus Ltd: Gentrack has agreed to acquire 75% of CL Plus for $NZ 11.4 million, with a three-year earn out for the remaining 25%. CA Plus complements Gentrack’s Airport Division, with its software used by clients to optimise and audit retail revenue in airports. Airport owners typically charge a rent plus a percentage of sales. CA Plus’s software enables airports to monitor and charge variable rates to retailers.
  • Blip Systems A/S: Gentrack will acquire 79.81% of Blip Systems for $NZ 8.4 million, with another three-year earn out. The Danish company has created software used to monitor passenger movement and traffic within airports, which is useful for capacity projections and monitoring waiting times.

Both acquisitions appear highly complementary to Gentrack’s business and are expected to be earnings per share accretive from its 2017 financial year onwards. Additionally, they extend Gentrack’s customer base.

Buy, hold or sell Gentrack

In my opinion, despite its recent share price rise, the valuation of Gentrack shares appears more favourable than that of other ASX technology shares like XERO FPO NZ (ASX: XRO) and iSentia Group Ltd (ASX: ISD). I’d rate Gentrack a buy for the long run. 

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes and encourages your feedback. You can follow him on Twitter @OwenRask.

 The Motley Fool Australia owns shares of Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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