Buy Hold Sell

Amazon, Microsoft and Oracle may be familiar names for investors playing the cloud computing megatrend. But there’s a special cluster of small-cap ASX companies looking to do big things in the cloud sector too.

This megatrend is set to garner more traction as providers find ways to help governments and companies manage client information, IT infrastructure and enormous amounts of media, and industry research suggests the sector is set to grow 21% annually on average to become a trillion-dollar market by 2025. 

In this episode of Buy Hold Sell, Matthew Kidman of Centennial Asset Management sits down with fundies Shane Fitzgerald from Monash Investors and David Keelan of Ellerston Capital to discuss opportunities among the homegrown small caps riding the cloud higher. 


Transcript

Matthew Kidman:
Welcome to Buy Hold Sell, my name's Matthew Kidman. It used to be that if you had your head in the cloud, you were a dodo. These days, you're at the cutting edge. Here to talk about cloud stocks, is Shane Fitzgerald from Monash and Dave Keelan from Ellerston. Welcome gentlemen. Let's start with you, Shane. 

MNF, who do voice over the internet, have been around for a while and are growing. Buy, hold or sell?

Shane Fitzgerald:
It's a sell for us. It's quite a complex business to wrap your head around. The one thing that we don't like about the business, is the headwind of voice itself. We think the voice market is going to slow down as other mediums of communication take hold. We think the result as recently resolved was okay, but it was nothing spectacular. So for us, it's a sell.

Matthew Kidman:
Voice is dead, we don't talk anymore. Buy, hold or sell?

David Keelan:
We think it's a buy. We think the company is doing pretty well introducing themselves as a toll road add on other services, so that they can continue to grow the margin.

Matthew Kidman:
Okay. Megaport, it links up all the real estate that holds the cloud in it. Buy, hold or sell?

David Keelan:
Hold. We've been in Megaport since it was two dollars, it's now over a billion-dollar company. They have done very well, it's just hard to get the valuation to work at these levels.

Matthew Kidman:
Big valuation, big prospects though. Buy, hold or sell?

Shane Fitzgerald:
For us it's a buy. We think the land grab as it's been called, they're the leader in that race. Big expansion going on in the Americas at the moment and it's in the early stage of the adoption. All the metrics, to us look fine. So yeah, we're happy to keep that one. 

Matthew Kidman:
Okay. So going back to voice, but recording voice as a record. Dubber, buy hold or sell?

Shane Fitzgerald:
Dubber is a hold for us. The most recent quarterly was just a little bit soft and they've just recently launched into Cisco. so we want to see how that goes. But, while I'm negative on voice, I'm more positive on Dubber because of the regulatory requirement to record the voice. Which, is frankly, a better solution than the incumbent players can provide. So for us as a hold, we want to see things play out from here.

Matthew Kidman:
Dubber has great growth prospects, it's also pretty new; would you buy, hold or sell?

David Keelan:
We think it's a buy. When we look at whats happened in the last quarterly, growth isn't linear. It comes through in stages. The valuation is a bit punchy, but, it's a very scalable platform and right now the regulation is needed. I think they'll do a good job.

Matthew Kidman:
Okay. What else is up in the electronic cloud that might do well in the next little bit?

David Keelan:
There's one we like, which is Damstra. Damstra has just been listed, though we've been there for a couple of years unlisted. Damstra is an integrated workforce cloud system. Where they have their own hardware, that goes on the client site and helps manage all the risk assessments on heavily complex industries. We think they'll do well.

Matthew Kidman:
Okay. Shane, do you have something for us?

Shane Fitzgerald:
We like Infomedia. Infomedia has all the categories you want in software as a service. High retention or recurring revenues, I should say. They're really starting to expand outside of the OEM networks, into the vehicle market. We think there's a lot of growth to come through from that. Going in lockstep with that, is the super service product that goes lockstep with the micro cat. Finally, Nidasu, which is the new acquisition they've made. We've had several meetings with a couple of our key car manufacturers, and they sing the praises of this product. So we think that has a lot of opportunity as well.

Matthew Kidman:
The good thing is, there might be a few electronic clouds out there, that you can go and sit in.

Enjoy that?

Last week we looked at the popular WAAAX stocks – Wisetech, Appen, Afterpay, Altium and Xero to see if the wax is melting, or whether these stocks could have higher to fly just yet. You can watch that here

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Not recommendations, please read the disclaimer and seek advice where appropriate. 





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