@Solvetheriddle I totally agree with your remark about $TNE's client base as marking them late in the adoption of agentic AI.

Local Bodies, Universities, Governments, and Government Departments tend to be (what I call) lower skill, lower risk appetite organisations. Their governance and public accountability will make then late adopters.

That's a horrible generalisation, and of course it's not entirely true. Australian Federal Departments have tried their hand at adopting key software automation capabilities like RPA (Robotic Process Automation). In many respects they were ahead of many commercial organisations. The ATO was particularly innovative.

But this gave us the likes of Robodebt and the ATO GST-scams that featured recently on ABC Four Corners. But I guess that's my point. The organisational response to these "mistakes" will crush the innovation that allows early adoption. Or at least it will slow it down.

So my thesis is that $TNE will develop and integrate these AI capabilities into the platform, and offer them as part of the integrated solution to clients. This is part of my macro-thesis that the SaaS companies that "own" the data and control the workflow will be best placed to integrate the AI capabilities. Of course, that requires them to continue to invest heavily in platform R&D and to have an innovation culture that allows them to stay at the leading edge. Looking at my own portfolio, I think the big data players like $RMD, $WTC, $XRO and $TNE are all doing that.

Of course that doesn't mean that one or more new players, who are just better at deploying these disruptive technologies without legacy technologies to bog them down, come along and topple the incumbents. Afterall, that's what $WTC, $XRO and $TNE and others have each done in their industries, right? And isn't that more often than not the case when major new technologies come along?

On the specific theme of AI adoption, it's very early days. So far the major use cases seem to include 1) streamlining customer service agents, and 2) improving the productivity of coders (hence, several companies laying off coders.) Agentic applications will need to have a well-defined "operating space" so that risks can be managed. (The more I use AI, the more I realise how many mistakes it makes and how careful you have to be.) Funnily enough at lunch today, taking a break from my prep for reporting season, I listened to this Exchanges at GoldmanSachs podcast:

https://www.goldmansachs.com/insights/goldman-sachs-exchanges/ai-exchanges-ais-impact-on-employment

It's pretty good, because it explains some of the factors at play that are limiting the rate of adoption of AI although it doesn't really take about agentic AI. The GS guys are still highly uncertain whether the rollout will be big in a couple of years, or roll out gradually over a decade.

In reality, it is going to run at different paces in different sectors, but I think that overall, the broader "roll-out" will be a decadal or mutli-decadal phenomenon. That's because these things aren't limited by the tech itself, but by the behavioural change that has to take place within organisations, boards, customers etc. And of course in that behavioural change we have to consider the roles of governance and regulation, and backlashes when things go wrong - which inevitably they will.

And I don't think we've yet seen the start of the regulatory backlash. There is a wide appreciation in governments across the world that social media has done a lot of societal harm and that nothing was done before the genie got out of the bottle. It's looking like the same is happening with AI (genie out of the bottle, I mean). But I do wonder whether a societal / regulatory backlash is coming. So I'm following with interest the fight that is starting in the UK and Australia on the attempts to control social media access for kids. The next 12 months will be a good indicator of whether there can be an effective regulatory response to AI. If governments can't implement something there and the tech firms "win", then I think any hope of effective regulation to control AI is lost.

We continue to live in absolutely fascinating times!

Solid assessment @mikebrisy and I too am bullish on TNE and the UK potential as well. Would be interested in your latest valuation when you update...as I don't currently own it on valuation grounds. It's the top of my to buy list. Before I understood it well enough it used to trade in a PE range of about 35 to 50 each year for about 5 years. Sadly, in the last two years the range has shot up a lot and I haven't added it in the 50 to 100 band where it sits right now.

It's a great business and I'm prepared to pay an above market average multiple but not one at 100 plus!

very comprehensive thanks

@Karmast I'll do a full update later in the year when the FY result is in. However, from a quick look at my last model update last year, I think you are right. Current SP will be at or above the top end of my [updated] range, as I've can't accept the P/E needed to bring the range further up.

I've been following $TNE closely for 3 plus years, and I've learned that there's no point sitting at the spreadsheet and raging at the screen that it's overvalued. I've made good money over that time by setting the spreasheet aside, and investing anyway.

That said, I think patience is important with $TNE to achieving good returns. Every year, over the last 5 years and longer, it delivers at least one occasion when it pulls right back into a range that I can justify on "fundamentals". The last such occasion was April this year, when as part of the boarder market "Tariff Temper Tantrum" it pulled back c. 20%. I considered that macro event had absolutely nothing to do with the prospects for $TNE customers.

Like you, I have tended to trade $TNE (increasing and decreasing weight) as it rolls around between its lower and upper P/E range. However, you are right to observe that things have changed this year, with the p/e range stepping up materially. This of course increases the valuation risk, should execution falter, and so I manage this by holding only a moderate weight in the portfolio, currently 6%.

So why has the P/E range stepped up? I think it is that more and more in the market are coming to appreciate the quality of the business. For example, there are few if any SaaS businesses that can double every 5 years purely on the strength of NRR. Secondly, the claims about SaaS+ implementation, if these turn out to be true, are a real differentiator and could drive a long runway of strong growth, particularly as $TNE is now positioned to attack more and more industry verticles.

I want to take a deeper dive into the company later this year, and so I plan to attend the "TNE Showcase" in Brisbane on 29th October. I've never been along to the previous ones.

Thanks @mikebrisy and I might see you at the Showcase.