MENU

Why this top fund manager likes Gentrack Group Ltd

One of the best places to find investment ideas is by trawling through high-performing investment manager’s top holdings to see what they think the next market-beater will be.

NAOS Absolute Opportunities Co Ltd (ASX: NAC) is one of the listed investment companies (LICs) run by Naos Asset Management.

Over the past three years the portfolio has returned an average of 18.51% per annum, thoroughly beating the ASX200.

It’s fair to say that the Naos investment team can identify a good long-term investment opportunity.

One of the biggest contributors to the LIC’s strong performance has been Gentrack Group Ltd (ASX: GTK).

Gentrack describes itself as providing essential services for essential software. Its clients operate in the energy, water and airport sectors. Red Energy and nPower are two of Gentrack’s biggest energy customers and Auckland International Airport Ltd (ASX: AIA) is one of its biggest airport customers.

Gentrack’s share price has risen by a whopping 170% over the past two years, but there could be a lot more to come.

The business has made a number of clever acquisitions which add scale and different functions to Gentrack’s offering to clients.

Management expect continued growth in FY18 to be driven by ongoing energy and water market reforms in the UK and Singapore. It’s targeting long-term earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 15%, although the timing of projects can affect this.

The business is expanding its research & development program to help deliver on long-term targets. It’s also moving into new Auckland headquarters and expanding its Melbourne & London offices to support growth.

In FY17 it grew revenue by 43%, EBITDA by 43% and net profit after tax by 54%. Without the acquisitions it grew revenue by 18% and EBITDA by 24%. Most businesses would be happy with these results.

The business has a great future, particularly with its airport segment which grew EBITDA by 60% in FY17.

Foolish takeaway

Gentrack is currently trading at 45x FY17’s earnings with a dividend yield of 1.9%. I’m a fan of Gentrack and wish I’d bought shares earlier. However, a lot of growth is now factored in, so I’d be very wary of buying at today’s price. If the share price were to drop then I would be very interested.

Shares that are trading at much better value are these top growth shares.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended GENTRACK FPO NZ. 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.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!