Gentrack trades at a significant discount to its rivals

Gentrack (ASX: GTK) is a software provider to utility retailers and airport operators, with over 150 customers primarily located in Australia, New Zealand the UK. Shortly following the companies June 2014 IPO, a large contract dispute saw Gentrack downgrade profit guidance. Not surprisingly the stock was dealt with very harshly by the market, and did not recover previous highs despite resolution of this issue. We took the opportunity to build a position in the stock during this weakness, as we think Gentrack remains a good quality business that meets all out investment criteria. Management are very capable and retain a significant share holding in the business. The ongoing deregulation of utility markets globally offer ample opportunity for growth, whilst a sound net cash balance sheet provides significant optionality around either lifting the payout ratio or bolt on M&A. Perhaps most interestingly Gentrack trades at as significant discount to other listed software peers, and particularly its closest listed comparable company. We believe over time, with the execution of their medium term strategy, this valuation discrepancy can narrow. (VIEW LINK) (view disclaimer)