$TNE are holding their investor day today, and have lodged the massive 180 odd-slide deck on the ASX. I'd have liked to have attended today, but there is just too much going on. Clearly, judging by the presentation, there are a lot of slick management presentations giving investors the chance to see more of the broader management team. So I will certainly be keen to read the broker note. I particulary get a lot from the GS Research on $TNE. Their research is backed up by a lot of broader industry and competitor insights and, while I don't always agree with how they translate their insights into forecasts, Chris and Elise do a great job of backing up their analysis - which is more than many do. (For the record, GS have a TP of $19.70, are BUY rated, with a BULL case of $28.65)
There is a lot of content among the flashy slides, including detailed assessment of $TNE market positioning and major competitors in each of its industry segments. I imagine I'll return to the material in some detail over the coming weeks.
Looking at the material, one realises that although we might mainly consider $TNE a local government and educational institution ERP provider, they have year by year been extending and establishing footholds in a much broader range of industry verticals, with a growing range of functional modules. This is the broader platform for growth, to which we can add their recent foray into the UK (still early days).
The Major News Today
$TNE have a great track record of setting long term ARR targets and then hitting them early. While slowly expanding margins. No single result ever "knocks it out of the park", nor do they have bit nasty surprises. Its just relentless, grinding growth, at a decent clip.
Over the years, its probably the one stock I've devoted the least attention to: two results announcements per year, a quick check on the AGM for any updates, and a periodic model tweak. Plus the usual reading and keeping alert for news across its key verticles. In terms of $return per hour of effort invested, its the clear winner in my portfolio.
So, today's material news:
- From ARR = $500m in FY2025, to ARR = $500 by 1H FY25 (recently upgrade from FY26)
- ARR = 1bn by FY30
- NRR to be 115%-120%
- R&D to double their "APAC Whitespace" from $2bn to $4bn (i.e. growing functionality and verticles)
- Proft Margins to expand to 35% by 2030 (23.3% in FY23) "through significant economies of scale"
- ( ... and yes, yuk, total TAM $13.5bn .... for completeness)
Valuation
Plugging this info into my quick model, and treating FY30 ARR as revenue in that year (probably an over-estimate, but allowing for them to come in early, so I won't sweat the difference)
- EPS (FY30) = $1.045
- EPS CAGR 2023-2030 = 18.7%
- SOI growth og 0.5% p.a.
- Using a WACC of 10% (which is probably high for $TNE, which is more like 8-9%, but use this as an MoS) discounting back 7 years 2030 to 2024:
- P/E of 35 : Value/Share = $20.70
- P/E of 45: Value/Share= $26.60
Note: Average P/E over last 3 years has been around 47 (currently a bit spicey at 58.)
I'll put my Strawman valuation in between the two at $23.70.
Conclusion
At 7.3% of my RL ASX Portfolio, $TNE is my 3rd largest holding. Mr Market does present annual opportunities to buy, but today isn't one of them. (If the P/E fell back to around 40 - last there in Oct-22 - I'd add, and be happy to take it up to 10% weight. Who knows, maybe I'd get a little trigger-happy before then. But not today. )
Disc: Held in RL, not on SM