Which Software and Services Stock can spring up your return?

Nextdc Ltd

NXT Details
 
Bottom line pressure despite solid revenues performance: Nextdc Ltd (ASX: NXT) reported a rise in contracted utilization of 83% to 21.7MW in fiscal year of 2015, as compared to 11.9MW at the end of FY14. But, Nextdc reported a net loss after tax of $10.3 million during fiscal year of 2015, which decreased from $22.9 million in 2014. Accordingly, the group’s shares plunged over 1.93% in the last four weeks (as of December 02, 2015). On the other hand, the group built many major customer contracts during FY15, which comprised those with many major firms like Microsoft for connections to the Azure and Office 365 public cloud platforms via ExpressRoute; PCCW Global and its worldwide MPLS network; CenturyLink, the third largest telecommunications company in the United States; and global network provider CloudFlare. Nextdc also entered into major contracts with the Australian Electoral Commission and the Australian Prudential Regulation Authority for services at the group’s C1 Canberra data center.
 

Partner Ecosystem (Source: Company Reports)
 
Moreover, the group received $35 million Federal Government contract during fiscal year of 2015 ending. Nextdc earlier won two major International Customers for initial capacity of over 1MW at S1 during last year December and for 4MW across M1 and S1 during June 2015. Meanwhile, Nextdc is also boosting its capital position and recently finished the placement and Institutional Entitlement Offer. The group’s placement raised over $50 million at $2.55 per share (as of November 20 closing price), a 13.3% premium to the offer price of $2.25 per new share under the Entitlement Offer. With the Institutional Entitlement Offer, the group raised over $40 million on the back of solid support from current shareholders as well as new investors. Through the Retail Entitlement Offer, Nextdc intends to raise over $30 million.
 

Statistics for pipeline, revenue, customers and interconnection (Source: Company Reports)
 
Stock Performance: Management reported that the group’s first four months of fiscal year of 2016 performance is on track while reiterated their FY16 revenue guidance of $85 million to $90 million, which is a 39% increase as compared to FY15. Moreover, the group estimates a solid EBITDA of $25 million to $28 million, which is a 200% increase against FY15, indicating its efforts to improve its efficiencies. Meanwhile, Nextdc forecasts a slight skew towards second half earnings performance due to possible delivery and billing commencement of the new Leading Corporation and Federal Government customer contracts which were reported during June and August 2015. Nextdc is also opening new data center facilities at Brisbane and Melbourne as well as conducting further discussions to target potential customer opportunities by leveraging its current data center footprint. We believe the recent correction in the stock opened an attractive investment opportunity, given its solid outlook and potential. Based on the foregoing, we give a “BUY” on Nextdc at the current price of  $2.43
 
 
NXT Daily Chart (Source: Thomson Reuters)
 

Adacel Technologies Ltd

ADA Dividend Details
 
Outstanding 2015 financial year performance drove the stock higher: Adacel Technologies Ltd (ASX: ADA) delivered a strong 2015 financial year performance for the fourth consecutive year, generating a profit before tax rise of over 200% to $5.9 million as compared to $1.8 million in FY14. Solid order book coupled with the group’s efforts to streamline as well as enhance its efficiency of business operations contributed to the profits. Adacel Technologies reported a revenue growth of 26.6% to $41.9 million from $33.1 million in FY14, and consequently boosted its cash balance by $5.4 million to $7.6 million from a negative $3.9 million in FY14. Moreover, management estimates to generate ongoing growth performance and even upgraded their FY2016 guidance. The group now expects its profit before tax for FY2016 to grow over 50% against FY2015, as compared to its earlier estimates of 25% increase from FY2015.
 

Products under Development (Source: Company Reports)
 
Management enhanced its FY16 guidance due to continuing solid operating performance for the first three months of FY2016, more than estimated receipts of several orders from present customers as well as more average gross margins on the back of the group’s efforts to enhance efficiencies, which were already reflected in the first quarter of FY2016. Falling Australian dollar against the US dollar would also boost Adacel Technologies FY2016 earnings performance. On the other hand, Adacel Technologies shares generated outstanding returns of about 563% during this year to date (as of December 02, 2015) while rallied over 296.1% in the last six months and 104% in the last three months. However, this heavy surge has placed the stock at unreasonable valuation, with the stock trading at a very high P/E of about 39x and quite close to its 52-week high price. Adacel Technologies also has a very low dividend yield of just 0.9%. Accordingly, we give an “Expensive” recommendation on the stock at the current price and would review the stock at a later date.
 
 
ADA Daily Chart (Source: Thomson Reuters)

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