OCL - Objective Corporation

[System]

Objective Corporation Limited (OCL) is in the provision and support of its own Enterprise Content Management (ECM) software solutions for the software industry. OCL has developed a packaged suite of software targeted at SMEs, corporate and government clients. OCL sources its revenue from the sale of its products, consulting fees from implementation services and ongoing maintenance and support services.

http://www.objective.com

 

[skc]

An interesting little company that is managing to grow in a tough IT industry. A presentation out today illustrating its business and financials. But here's the page that looks the most interesting to me.



Disclosure: I hold.

 

[McLovin]

Wow. Those guys have some serious R&D; 25% of sales. All expensed too.

No debt. Looks pretty interesting. Might have to dig a little on this one.

 

[VSntchr]

Wow. Those guys have some serious R&D; 25% of sales. All expensed too.

No debt. Looks pretty interesting. Might have to dig a little on this one.

Yeah the HY report states that the focus is on revenue growth not profitability so expensing the R&D is a good way to minimise tax (and makes it a bit more clear to analyse too )

 

[skc]

Wow. Those guys have some serious R&D; 25% of sales. All expensed too.

No debt. Looks pretty interesting. Might have to dig a little on this one.

I think the chart which shows customer value over time-of-relationship really shows the potential of this company. An increasing share of recurring revenue is also a big positive.

It has the building blocks of something that can be leveraged operationally. Whether it is able to deliver on the growth potential will obviously come down to execution. But at current prices I think it's a worthy punt.

 

[skc]

An interesting little company that is managing to grow in a tough IT industry. A presentation out today illustrating its business and financials. But here's the page that looks the most interesting to me.

View attachment 57441

Disclosure: I hold.

Wow. Those guys have some serious R&D; 25% of sales. All expensed too.

No debt. Looks pretty interesting. Might have to dig a little on this one.

Up ~50% since I posted. McLovin, how much of the volume was yours?

 

[McLovin]

Up ~50% since I posted. McLovin, how much of the volume was yours?

Tell me where to send the bottle of Grange, skc.

 

[skyQuake]

Tell me where to send the bottle of Grange, skc.

Make sure its a 1959 bottle.

And signed by Barry

 

[Dona Ferentes]

another sleeping beauty. OCL has been around for more than a decade

Objective Corporation Limited (OCL) is engaged in the supply of information technology software and services. The Company provides content, collaboration and process management solutions for the public sector in Asia Pacific and Europe.

Market cap $260mill, PE nudging 30 but has for quite a while. Robust RoE and low debt.

20c in 2011, was $2.80 in June 2019 and now $6.00

was mentioned by Mirrabooka in their roadshow slides:

• Founder CEO with strong alignment to shareholders
• Transitioned business to subscription revenues away from one-off, upfront payments
• Conservative accounts with all R&D expensed as its incurred
• Strong net cash balance provides value latency and opportunities for acquisitions

 

[Dona Ferentes]

another sleeping beauty. OCL has been around for more than a decade

20c in 2011, was $2.80 in June 2019 and now $6.00

was mentioned by Mirrabooka in their roadshow slides:

and now in the $7's, a fresh high. Have acquired another company, ITree, which operates in the same area, providing content, collaboration and process management solutions for the public sector.

 

[Dona Ferentes]

ITree offers cloud based "safety, regulation, compliance and enforcement solutions for government agencies and regulated industry." Operates across Aust and NZ.

The Ann has a wonderful para; "Both Objective and ITree were born in Wollongong, NSW. Both companies are deeply focused on delivering outstanding community outcomes through serving the needs of public sector organisations. Both companies shun offshore and outsourced development, preferring to directly employ local world class engineers in their own development campuses."

However, there is one scary paragraph, further down: There are hundreds of regulators across Australia, New Zealand and the United Kingdom. With more than 1000 customers globally, Objective will use its customer engagement team to ......"

 

[Dona Ferentes]

so far, so good. Into the $9's

Objective Corporation Ltd (ASX: OCL) has been a long-term provider of software solutions to the Australian Government, and recently entered the second 3-year term of their 6-year contract with the Department of Defence. OCL originally announced they had won this contract with the Department of Defence for the FY18 - FY23 period back in July 2018. We believe one of the hallmarks of a high-quality software business is the ability to generate organic revenue growth within the existing customer base through increasing customer usage as well as expanding the product/service set to these customers. In our view, OCL has been able to demonstrate this over time, and pleasingly, the abovementioned contract has increased in value since commencement in FY18.

At their FY18 Annual General Meeting (AGM), OCL provided clarity on what the current Annualised Recurring Revenue (ARR) of the business was, (at that stage $40.5 million) and what OCL believed the long-term potential of the business to be ($127.1 million). With a majority of OCL’s clients operating in some form of government/regulated environment and with a significant amount of emphasis being put on cloud migration, governance, transparency, collaboration and ease of use, we continue to firmly believe that OCL has the ability to achieve this ARR figure over the long term. With a cash balance of close to $40 million we believe there is potential opportunity for further strategic acquisitions, as funding for smaller private businesses in the current economic climate has become significantly more challenging.
from Naos Ex-50 Fund (NEC) monthly. A long term holder.
Also #3 in Mirrabooka holdings

 

[Dona Ferentes]

Objective Corp cracked $1billion market cap on Tuesday. OCL ... sells software products to governments around the world to improve processes and the productive handling of documents, is riding high on insatiable investor appetite for technology stocks.

Tony Walls, who started Objective in 1987, owns 66 per cent of the company, valuing his stake at $675.8 million on Tuesday and cementing his debut on the Financial Review Rich List when it is published later in the year.

Objective shares have soared 82 per cent since the start of the year, hitting a record $10.90 on Tuesday and making it one of the best-performing stocks on the All Ordinaries Index. It is up 147 per cent from its March low of $4.40.
(and that was only a blip, really)

 

[galumay]

One I looked at and misunderstood.

 

[Dona Ferentes]

Seems to be rewarding those that have kept the faith . First Half 2021 lining up with no surprises

• The expected headline results for 1HY2021 are a revenue increase of 40% to $46.5m (1HY2020: $33.3m) with an EBITDA increase of 74% to $11.8m (1HY2020: $6.8m).
• Annual Recurring Revenue (ARR) at 31 December 2020 was $70.1m, representing an increase of 30% over 31 Dec 2019 ($54.1m). Perpetual right to use (upfront licence) fees continued to decline as a percentage of revenue, representing only 3.6% of total revenues in 1HY2021 (7.4% in 1HY2020).
• Cash balance at 31 Dec 2020 was $27.7m. During 1HY2021, Objective paid $18.4m as consideration for the acquisition of Itree Pty Limited and fully franked dividends of $6.6m.
• Significant investment in innovation remains at the heart of our economic model. We invested $11.1m in Research & Development (R&D) in 1HY2021, an increase of 45% over 1HY2020 ($7.7m). The R&D investment in 1HY2021 represented 24% of revenue. We have continued our policy of expensing 100% of Research and Development expenditure as incurred.

I noticed Mirrabooka, having ridden the escalator up, has trimmed its holding.

The most material selling in the 6-month period has come from trimming some of the strongest portfolio performers because of valuation risk, Objective Corporation (and HUB24)

5 year chart:

 

[Dona Ferentes]

and now just below $19. Has made $20 recently, but there was Director disclosing a 50% selldown yesterday !

From one longterm institutional holder (NAC), in the 31 Jul update

OCL released a trading update and profit guidance for FY21, with headline figures such as revenue, EBITDA and NPAT up 36%, 49% and 45% respectively, in what was again another stellar result. It is worth pointing out that from a broker/analyst perspective there are no current broker estimates for OCL, even though it now has a market capitalisation of over $1.6 billion.

What really caught our attention was that the cash balance increased by +48% even after the payment for the iTree business, and dividends paid over the course of the year. A cash movement such as this can potentially be a lead indicator for the year ahead as subscription clients often pay in advance for the upcoming year.

In our view this provides significant weight to the outlook commentary provided by the CEO in the update, who stated that OCL expect the momentum of the business to drive a continued material uplift in revenue and profitability in FY22.

..... but interestingly, OCL was #9 in MIR holdings for July 2021, holding some $16M, but had dropped out out of the Top 20 in August !

 

[Dona Ferentes]

OCL seems to be making lower highs and lower lows as it slides from $20 highs since 2021

Market cap is about $1.2 Bill,

Now PE is still in the 60s, .... V. high for low growth

Buying back shares , but then the 11c dividend is only partly franked, so that's fair enough.

 

[Dona Ferentes]

same old ... buying back shares, market seems to say it isn't all beer and skittles.
.
3 year chart / slippery slide:

.
NH.

 

[Dona Ferentes]

I noticed Mirrabooka, having ridden the escalator up, has trimmed its holding.

and back in the MIR top 20 after a while in exile