Tech shares in the S&P/ASX 200 Index (ASX: XJO) could be worth looking at because of the underlying growth that they’re achieving.
Businesses that have fallen a bit in recent times might be better value than a few weeks ago.
Hub24 Ltd (ASX: HUB)
The Hub24 share price has fallen by around 10% over the last month.
It’s currently rated as a buy by the broker Credit Suisse which has a price target on Hub24 of $27.70.
Hub24 is one of the larger ASX fintech businesses. The Hub24 platform offers advisers and their clients a large range of investment options including managed portfolios, enhanced transaction and reporting functionality.
It also owns HUBconnect, which focuses on leveraging data and technology to provide solutions to challenges for licensees and advisors, and helps with the delivery of professional advice to Australians.
Hub24 recently revealed its update for the quarter to 31 March 2021. It experienced a record quarter of net inflows of $1.9 billion, which was an increase of 41% year on year and $0.2 billion higher than the last quarter.
Its funds under administration (FUA) is now $51.4 billion, including the acquisition Xplore Wealth which contributed $17.2 billion as at 31 March 2021 with platform FUA of $35.6 billion (up 136% year on year).
The ASX 200 tech share’s new business pipeline continues to grow with 28 new licensee agreements signed during the March quarter, with large boutique licensees, self-licensed practices and a new distribution agreement with an existing Xplore client where additional Hub24 products will be offered alongside the current Xplore solutions.
According to Credit Suisse’s forecast, the Hub24 share price is valued at 49x FY22’s estimated earnings.
TechnologyOne Ltd (ASX: TNE)
The TechnologyOne share price has also fallen around 10% over the last month.
It’s Australia’s largest enterprise software company with offices across six countries. It provides a global software as a service (SaaS) enterprise resource planning (ERP) solution to help customers get access to high-quality software anytime. It has over 1,200 corporations, government agencies, local councils and universities as clients.
UBS currently rates TechnologyOne shares as a buy with a price target of $9.15. UBS likes the Australian government growth, stronger UK position and the SaaS growth.
The business is due to hand in its FY21 half-year result this week, but the FY20 result included a number of growth measures. TechnologyOne saw underlying profit before tax increase by 13% for the year. SaaS annual recurring revenue (ARR) grew by 32% to $134.6 million.
TechnologyOne explained that its SaaS ERP solution helped when COVID-19 hit. Customers could seamlessly shift to remote working. Management said that COVID-19 has reinforced the significant value proposition of its software.
In FY20 the ASX 200 tech share continued to win new, large enterprise competitors. More than 30 organisations replaced its competitors’ systems, including from Oracle, SAP and Microsoft.
As the broker pointed out, it continues to dominate in the local government sector. It has closed 40 major deals with more than $45 million in total contract value. It now has more than 300 council customers. According to UBS, it’s valued at 38x FY21’s estimated earnings.