It might be a surprise to some investors, but the ASX has a number of market leading technology stocks that posses the potential and ability to compete in global markets.
Although the US market is usually associated with the best, most successful and most promising technology stocks, some of our own home grown companies have delivered excellent returns for shareholders over recent years.
The success of these companies and the positive outlook for the technology sector as a whole means many of the best companies trade on very high valuations. Investors need to be weary of these lofty valuations as the technology sector is known to be volatile, especially at the smaller end of town where liquidity is sometimes an issue.
Despite the higher risk profile of some of these companies, investors would be wise to keep a close eye on the sector as great buying opportunities can appear when you least expect it.
With that in mind, here are four high-tech growth stocks that I’m watching closely:
1. Mobile Embrace Ltd (ASX: MBE) – Mobile Embrace is a mobile marketing and payments company based in Australia with rapidly expanding operations in a number of international markets. With the number of smartphone users increasing throughout the world at a rapid pace, the potential market for Mobile Embrace continues to grow as well. A number of recent acquisitions are being integrated into the business and the early signs have been positive. Mobile Embrace recently produced its best ever quarter and is on track to deliver a healthy full year profit. After climbing more than 60% over the past month, the shares are now trading at more than 35x FY15 earnings and investors might want to wait for a pull back before jumping in.
2. Hansen Technologies Limited (ASX: HSN) – Hansen provides billing solutions for a number of industries and utility providers such as electricity, water and telecommunications. Importantly, there a number of barriers to entry into this market and Hansen has developed long-standing relationships with some of the largest utility providers around the world that has enabled it to create ‘sticky’ revenues. With the help of acquisitions, Hansen has been able to consistently increase its earnings and the company is expecting earnings growth of 25-30% for the year ahead. The shares aren’t cheap however, trading on a price-to-earnings ratio of nearly 27.
3. BigAir Group Limited (ASX: BGL) -BigAir owns and operates Australia’s largest metropolitan fixed wireless broadband network as well as offering cloud and network based services to businesses. BigAir also operates a Community Broadband business that provides centrally managed internet and WiFi solutions for businesses like hotels, universities and shopping centres. The share price of BigAir has now increased by more than 55% since bottoming out in July and looks fairly valued at these levels. The market fears of slowing growth never materialised, and instead, BigAir delivered a solid 34% increase in underlying profit for FY15. The growth outlook for the year ahead is still positive, but after such a strong rise in the share price, investors shouldn’t feel rushed to take a position just yet.
4. Touchcorp Ltd (ASX: TCH) – Touchcorp has developed a software system to enable retailers to deliver non-physical items and services (like gift cards, prepaid phone credit and lottery tickets) to customers through various service points that can be directly integrated into the retailers existing system. Touchcorp generates its revenue from transaction and integration fees and although it has only been listed for nine months, its first public result was fairly positive with sales revenues increasing by 69% over the previous corresponding period. The company is also expanding into overseas markets although it is too early to tell whether this will be a successful move for the company just yet. As Touchcorp is a relatively new listing, without a proven earnings record, investors may prefer to keep a close eye on the company until it releases another set of results.
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Motley Fool contributor Christopher Georges has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia owns shares of Hansen Technologies and TOUCHCORP FPO. 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.