It’s the fear that government spending will finally be cut back or brought in house instead of outsourced. First it was labour cutting back on consultants, then it was the downturn in IT after the COVID boom and now it’s fear leading into the election.

That said they have consistently delivered that’s for sure, and profit has grown consistently despite the issues. I do think you need that revenue growth though to see any market attention as @edgescape said.

Thanks for your replies @edgescape @Mujo. I think you’ve nailed it. Revenue has come off and the concern about the government bringing more ICT professionals in-house. There is also the risk of cuts to government spending.

I think @Wini mentioned last year that Hitech’s revenue is shifting more toward the higher margin recruiting services as the government brings more ICT in-house. At the same time ICT contracting services have contracted resulting in lower revenue, higher margins and higher profits.

So the question is where will all this end up? Will the recruiting services steady up? The market is probably nervous about the uncertainty that lies ahead which probably explains why the share price hasn’t moved in 4 years.

@Rick I broadly agree with the comments on this one. Without revenue growth, there has to be limited scope on margin improvement. Thinking ahead, if I was to see revenue growth tick up again, say in FY25, I then have to ask the question “what is the quality of that growth”? Recruiting services is a pretty competitive space, and I have no idea if these folk have any edge that would allow them to sustain any performance shown for a period. It doesn’t look compelling to me, even though the metrics are pretty attractive for a small business as you’ve shown. But then again, I am only commenting superficially and haven’t checked under the bonnet.

@mikebrisy Hitech have a few tools (eg. Hibase) that might give them an edge in a competitive market. However, for Hitech to do well the demand still needs to be there. Anyway, it’s a tiny company and almost impossible to build a meaningful position in.

@Rick

ive been a holder for some time and it ticks along ok. One previous problem had been the Hazouris rewarding themselves with options, so EPS hasn’t been great. That seems to have moderated of late.

I hold IRL as well. On my numbers since late 2019, about a 19% return p.a. Not mind blowing, but not bad either - the dividend yield is high which might be making the share price appreciation look a little soft. At least you have founders with significant skin in the game - agree with @Chagsy they have been a bit generous (to themselves) in the past but it is moderating. The narrative of government looking to "in source" a lot of what HIT provides isn't new, and the business has still managed to grow and provide excellent ROE despite this headwind.

Would also add the declining revenue growth would effectively discount PE as well as investors exit to chase more highly priced stocks that have better "futrue" growth prospects (both revenue an earnings). That's even if earnings were growing.

You already saw Gentrack as one example where the profitability went backward but the share price went up due to the revenue growth and also the big wins in Asia. Already it seems some people were latching on the Asia and Saudi Arabia wins and trying to extrapolate what the future earnings would be for next year and pretty much saw through why the profit went down due the performance shares being issued.