One I bought at a $1.20 two months ago and wish I had held and built a bigger position - now up close to 100%! Clear turnaround in what should be a high quality business. Still some risks but appear to be executing.

Shaw and Partenrs - Gentrack Group (GTK)

Rating: Buy | Risk: High | Price Target: $4.50. A high-quality growth stock on a sub 10x EBITDA multiple. Reiterate Buy.

Event: GTK has delivered an impressive FY22 result. While the beat and FY23/24 raise was welcome, what really caught Shaw’s attention, was management see double-digit growth persisting through FY27. This firmly positions GTK as a growth stock. Management have shown their hand, investors can now either view these forecasts as fanciful or start pricing the stock appropriately. With GTK trading on just 9x FY24 Cash EBITDA Shaw’s believe a massive re-rate is coming. Shaw’s increase their PT to $4.50 (was $2.90) and believe a multiple of 23x is more reasonable for GTK’s growth and margin profile. GTK is a top pick. Reiterate Buy.

Recommendation: Shaw’s reiterate their Buy rating and increase their PT to $4.50 (was $2.90). The key driver of their upgrade is higher medium-term cashflows. On Shaw’s forecasts, which are now in-line with guidance, GTK is trading on 9x FY24 Cash EBITDA multiple. Shaw’s PT implies 23x which Shaw’s believe is reasonable for GTK’s growth and margin profile through FY27.

Gentrack has been a value destroyer for shareholders over the past 5 years with the valuation (market cap) dropping from $650m to about $110m BUT there could be an argument that the market has overreacted to the downside

AND now the company has issued not only my favourite type of announcement but also the most powerful type of announcement there is

EARNINGS UPGRADE

Revenue $115m

EBITDA mid-to-high single digit

This could be the catalyst for a turnaround and an inflection point for Gentrack

By the way, back in 2018 when the market loved Gentrack (market cap of $650m) the company had $104.5m of revenue and EBITDA of $30m

SO if the company get get back some growth AND/OR grow their margins then there is a LOT of upside here.