Shaw and Partners keeps a pretty close eye on the small to mid-cap technology sector on the ASX, and produces some interesting research about up and coming companies.
This week they've issued new reports on two of those companies, with each undervalued by more than 40% according to the broker.
Let's have a look at what they're saying.
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Humm Group Ltd (ASX: HUM)
This company recently released a third-quarter update, saying it delivered a "robust" performance, "despite significant macroeconomic and geopolitical uncertainty, an evolving interest rate environment, and subdued business and consumer confidence."
The fintech's assets under management was 5.1% higher than for the previous corresponding period at $5.4 billion, although new loan origination fell 8.6% to $820 million.
The company said its net interest margin was 5.3%, down 20 basis points, "reflecting deliberate portfolio choices and a rapidly evolving interest rate environment''.
On the outlook, the company said it expected growth to be subdued, "with Humm Group intentionally prioritising prudent underwriting and sustainable returns over volume''.
Shaw and Partners maintained its buy rating on Humm Group shares, saying the company was undervalued, trading below its net tangible asset value and at a lower price-to-earnings multiple than the small-cap financials sector generally.
The broker has a price target of 85 cents per share, compared with 58 cents currently.
Eroad Ltd (ASX: ERD)
Fleet management technology company Eroad recently reported its full-year results, with revenue coming in just 0.4% higher at NZ$195.2 million, while normalised EBIT was NZ$2.9 million, down from NZ$9.9 million the previous year.
That result was impacted by higher operating costs, non-recurring expenses, and lower capitalisation of R&D costs, the company said.
Executive Chair John Scott said, "Although our performance remained strong in our core markets of New Zealand and Australia with year-on-year ARR growing 5% and 73%, respectively, the group results reflect the legacy issues and challenges we have been managing''.
He added:
We have taken decisive action to reset the business and position it for sustainable growth over the medium to long-term. The transformation program commenced mid-year, with a focus on five strategic priorities – Operational Excellence, Product Excellence, Customer Service, becoming AI Native, and Winning eRUC (e-road user charge). All of this is supported by a new executive management team with the clarity and energy required to execute.
Shaw and Partners has steeply discounted its price target for the company from $2.15 down to $1.10, but this is still well above the 78.5 cents the shares are changing hands for.
