Energy Transition And Cloud Adoption Will Drive Powerful Long Term Upside Potential

Catalysts

About Gentrack Group

Gentrack Group provides mission-critical software platforms that help utilities and airports modernize operations and enable the global transition in energy, water and aviation.

What are the underlying business or industry changes driving this perspective?

• Acceleration of energy transition programs in EMEA and APAC, combined with utilities need to replace legacy billing and CRM systems, is enlarging Gentrack's addressable market and should support a sustained uplift in new logo wins and recurring revenue growth.
• Rising regulatory and customer pressure for smarter tariffs, distributed energy, battery and EV integration is increasing complexity for retailers, which plays directly to g2.0's deep functionality and should enhance pricing power and long term software and services revenue.
• Global airport and air traffic operators are investing heavily in digital capacity, congestion management and passenger experience, positioning Veovo's data driven platform to capture more high value, multi year contracts and expand margins as underlying growth remains strong.
• The shift by utilities and infrastructure operators toward cloud native, lower total cost of ownership platforms favors experienced vendors with proven delivery track records, which should help Gentrack defend renewals, win competitive displacements and improve earnings resilience.
• Increasing adoption of Salesforce and other modern CRM ecosystems among large utilities makes Gentrack's integrated front end architecture more attractive, supporting higher win rates, faster deployments and scaling of high margin recurring revenues and EBITDA.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more optimistic perspective on Gentrack Group compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Gentrack Group's revenue will grow by 13.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 8.2% today to 8.3% in 3 years time.
• The bullish analysts expect earnings to reach NZ$27.8 million (and earnings per share of NZ$0.29) by about July 2029, up from NZ$18.8 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as NZ$14.3 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 44.1x on those 2029 earnings, up from 21.8x today. This future PE is greater than the current PE for the AU Software industry at 20.8x.
• The bullish analysts expect the number of shares outstanding to grow by 4.39% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.85%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Winning only a small portion of the 30 million meter point new customer pipeline, or suffering delays in contracting those 10 advanced prospects, would limit the uplift in project work and recurring software and support fees that management is relying on to return to more than 15 percent compound annual revenue growth. This would constrain both revenue and earnings.
• Failure to secure three to four large new utilities contracts in FY '26, or to offset any future churn events similar to the recent Australian loss, would leave the utilities segment overly dependent on existing customers and renewals. Recurring revenue growth could then slow and operating leverage diminish, putting pressure on EBITDA margins and net profit.
• If g2.0 adoption does not scale as expected after the Genesis and ACEN go lives, whether due to cautious utilities, implementation complexity or stronger SaaS competitors, Gentrack may be forced to keep product investment near the current 19 percent of utilities revenue without a commensurate increase in subscription fees. This would compress net margins and delay the expected step up in earnings.
• Intensifying competition from incumbents such as SAP and Oracle, low cost new entrants and emerging C and I focused platforms could trigger sustained pricing pressure and higher cost of sale. This would erode total contract value per meter point and raise customer acquisition costs, reducing both revenue growth quality and EBITDA margin expansion.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Gentrack Group is NZ$7.43, which represents up to two standard deviations above the consensus price target of NZ$5.27. This valuation is based on what can be assumed as the expectations of Gentrack Group's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of NZ$7.5, and the most bearish reporting a price target of just NZ$4.4.
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be NZ$334.1 million, earnings will come to NZ$27.8 million, and it would be trading on a PE ratio of 44.1x, assuming you use a discount rate of 8.9%.
• Given the current share price of NZ$3.65, the analyst price target of NZ$7.43 is 50.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.