The ASX tech stock Gentrack Group Ltd (ASX: GTK) has been an under-the-radar ASX growth share for several years. Aside from the disturbance from COVID-19, the company has been an impressive performer over the past decade.
The business provides utilities businesses and airport companies with enterprise software for billing, customer and operations management.
Some of its customers include EnergyAustralia, Red Energy, Hunter Water, Vocus, Amber, Utility Warehouse, Cleveland Airport, Brisbane Airport, London Gatwick, Manchester Airport, JFK Airport, Edinburgh Airport, Sydney Airport, Melbourne Airport, Seattle-Tacoma Airport and Launceston Airport.
Fund manager Wilson Asset Management is excited about the potential of Gentrack, with the ASX tech stock being a position in the portfolio of WAM Capital Ltd (ASX: WAM).
WAM Capital is a listed investment company (LIC) that targets "the most compelling undervalued growth opportunities in the Australian market". Let's take a look at why WAM is optimistic about the technology company.
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WAM's bullish case on Gentrack shares
The fund manager pointed out that the Gentrack share price rose in November (by around 20%), after the release of the company's FY25 result, with revenue climbing 8% to NZ$230.2 million.
Profitability significantly improved at the ASX tech stock with operating profit (EBITDA) going up by approximately 18% and statutory net profit after tax (NPAT) increasing by 119% year-over-year.
Wilson Asset Management explained that this growth was underpinned by "solid demand" across both the utilities and airports segments.
Utilities total revenue grew 7% to $193.4 million with recurring revenue climbing by 12% thanks to wins and upgrades from prior periods turning into recurring revenue.
Veovo (airports) revenue jumped 15% to $36.8 million, driven by new customer wins in the prior year in the UK and the Middle East, as well as upgrades in the Asia Pacific region. Recurring revenue rose 18% year over year, while project work grew 13% compared to the prior corresponding period.
Strong outlook
The fund manager highlighted that the key focus for investors was new disclosure on the customer pipeline, providing "greater visibility on the number, scale and maturity of the opportunities being progressed."
WAM believes the above potential implies the ASX tech stock could more than double its existing recurring utilities revenue over time, setting a baseline for more than 8% revenue growth in FY26 (excluding new-logo wins) and an acceleration to more than 15% growth in FY27.
Wilson Asset Management also believes that operating leverage is expected to continue to drive profit margin expansion for the business.
Finally, the fund manager noted that the company recently hosted an investor day which highlighted "strong advances in the technology stack and importantly sees the g2.0 product suite now being available to new and existing customers."
