Recent research highlights both high growth and defensive qualities for investors in
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-Potential for accelerated M&A
-The aim of acquisitions to date
-Potential for further overseas expansion
Following recent share market volatility, investors may be seeking an investment with defensive end-markets across the private and public sector, which are relatively insulated from macroeconomic shocks.
ReadyTech Holdings ((RDY)) fits the bill, according to Goldman Sachs, and also provides exposure to multi-decade structural growth tailwinds as enterprises pursue digital transformation.
The global transition to cloud software-as-a-service (SaaS) from on-premise software is only around 20% completed, according to the broker, and the replacement of decades-old legacy systems is ongoing.
The people management software company is the leading provider of education, employment, as well as government and justice software in Australia.
The focus is upon complex niches that are under-served by both large and small enterprise software competitors. An example is shift scheduling and award payments in the "stand up economy" (e.g. hospitality, agriculture) and student management systems.
Along business lines, Education & Work Pathways accounts for around 40% of revenue, while Workforce Solutions and Local Government & Justice represent 30% apiece.
When initiating coverage last November, Jarden estimated a 19% five-year compound annual growth rate for revenue, and believed the growth would be mostly organic, coupled with M&A in key verticals.
The most directly comparable peers to
Goldman Sachs, which initiated coverage on
The overseas expansion is currently underway in the
The opportunity and the undervaluation
In the past, enterprises have viewed technological investment through the prism of cost reduction.
Now Goldman Sachs believes the aim is to modernise core systems and differentiate versus competitors, which benefits the likes of
While management has a FY26 organic revenue target of
The currently discounted valuation will likely be narrowed by strong organic growth execution. Also, the analyst feels strong cash generation provides potential for accelerated M&A, which could add circa 5-15% to the valuation..
Jarden expects organic growth from new customer acquisitions, upselling, product upgrades and yearly average selling price increases of 3-5%.
Acquisitions
Both
Shaw considered the transaction an extension of
The acquisition of Zambion in 2020, explains Shaw, began
The most prominent acquisition since listing, according to Jarden, is Open Office, a government and justice case management SaaS provider. This allows access to over 500 local councils of which 75% have legacy solutions from over a decade ago.
February results
During the February reporting season, Macquarie's earnings expectation was exceeded by 3% due to strong organic revenue growth, underpinned by 97% net customer revenue retention. Other contributing factors were new client wins and ongoing execution of the company's cross-sell and up-sell strategy.
Growth, accelerated by strategic M&A, is expected to underpin a further re-rate for the company's valuation multiple, suggested the analyst at the time.
The broker has an Outperform rating and 12-month target price of
Meanwhile, outside of the FNArena database, Goldman Sachs,
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