Objective Corporation Ltd

OCL Details

Double digit growth in key financial parameters for FY17: Objective Corporation Ltd (ASX: OCL), a quality information and process governance software solutions company, has had a healthy revenue and earnings result for FY17. OCL recorded a double-digit revenue growth (of 25%) to $62.6 million with all business units delivering growth, while EBITDA surged 67% to $10.5 million and earnings per share soared 55% to 9 cents per share. The group had continued to invest in product launches in FY17 that include Objective ECM (enterprise content management), Objective Keystone and Objective Trapeze; and these products have yielded strong operating profits. For instance, Objective ECM reported for 35% growth in operating profit while Objective Keystone’s operating profit was up 67%. The group expects incremental growth opportunity for FY18 and beyond for its Trapeze product. This overall result helped the group achieve 56% rise in net profit after tax.

Dividend per share (Source: Company Reports)
 
Focus on Customer Retention: The group has been able to maintain customer churn below 1% while focussing on delivering long-term value in FY17. The ability to seamlessly integrate and provide a unified user experience has helped the group expand its solutions’ base for customers. For instance, OCL has witnessed a significant uptake of fully hosted ECM SaaS offering and rapid uptake of workflow library. This has helped setting deeper customer engagements. Through Objective Connect, OCL’s product for SharePoint multi-workgroups, the group has broadened its partner sales model in Australia, New Zealand and Europe. In a way, OCL is targeting to attract new customers through organic growth and new channels with existing partners. Keeping this in view, OCL had increased its R&D investment to $12.9 million from $11.3 million, representing 20.5% of revenues.

In last one year, OCL stock has risen 41.6% (as at September 19, 2017), and is peaking towards its 52-week high price. The group anticipates a positive FY18 performance with historic skew to second half. Further, the group expects to keep on investing in new opportunities and products. Although the current momentum looks positive, the strategy on increased investments with new products roll-out and transition to models including subscription based licensing models, may pose some pressure. We think it is time to reap profits from the stock, and give a “Sell” recommendation on OCL at the current price of $ 2.58


OCL Daily Chart (Source: Thomson Reuters)

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