Equity Analysis /

AU : Technology One - Flying back up the S curve

    Nick harris
    Nick harris

    Senior Analyst - Telecommunications

    25 May 2022
    Published by

    TNE’s 1H22 result was slightly better than our expectations while guidance for FY22 was inline with our expectations, albeit a slightly different composition. 97% of revenue is now SaaS and continuing business which means TNE has effectively completed its SaaS transformation. Typically a transformation of this nature comes with a lot of pain but TNE have navigated the transition incredibly well, in our view. The revenue drag from a declining legacy (on-premise) business is mostly done. Consequently TNE will book, on our estimates, ~15% revenue and 14% EPS growth. With revenue growth accelerating EPS growth gets much easier. Our target price decreases to $11.53 on tech/peer de-rate. Partially offsetting this, we upgrade our EPS forecasts ~2% and retain our Add recommendation.