Utilities and airports software company Gentrack Group Ltd (ASX: GTK) has announced it will buy New Zealand company Prospero Energy, while also reporting a fall in half-year profit.
Gentrack is tipped by broker Shaw and Partners to more than double in value, following the company's shares falling from highs greater than $12 over the past year to $3.49 now.
We'll get to the specific Shaw and Partners price target later.
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Building out its energy division
On today's acquisition, Gentrack said in a statement to the ASX that Prospero, which trades under the name Factor, is a software-as-a-service business serving the energy retail sector.
Gentrack said further:
Factor's platform enables utilities to price and manage commercial electricity contracts at scale, replacing legacy systems with machine learning running over scaled data sets. Factor has global ambitions with customers in Australia and the United Kingdom, and partnerships with Salesforce and AWS. The acquisition will be integrated into Gentrack's utilities business, enhancing its g2 energy retail platform and reinforcing Gentrack's leadership position in the B2B energy retail segment.
Gentrack said the acquisition would help it provide the gold standard in energy pricing and forecasting.
The company added:
Gentrack's customers include some of the world's largest and most advanced energy retailers specializing in the Commercial and Industrial segments. Factor's advanced systems will be an integral part of g2, allowing us to immediately bring this capability to our customer base, helping both our customers and Gentrack grow revenues. With Factor, g2 will be even more compelling to new prospects around the globe, helping us win more business and accelerate the energy transition.
Gentrack will pay NZ$24 million for the business with a potential earn-out of NZ$10 million linked to revenue targets.
The deal is expected to be earnings per share accretive in FY28, Gentrack said.
Profit slump
The company also reported its half-year results to the end of March 31, with revenue falling from NZ$112 million to NZ$110.1 million, and net profit falling from NZ$7.2 million to NZ$5.1 million.
The company said sales cycles in the utilities sector were long, and "the long sales cycles, and two unexpected new client delays, have had an impact on our results this first half, but does not change our confidence in our medium-term growth targets of more than 15% CAGR''.
Gentrack said its airports division, Veovo, had an "exceptional" first half.
Shares looking cheap
Shaw and Partners recently issued a research report on Gentrack, setting a $8 price target for the company.
The broker said the recent sell-off in the company's shares "increasingly implies a structural slowdown that management commentary and pipeline visibility do not support".
Gentrack is valued at $366.6 million.
