Human resources and education software company ReadyTech Holdings Ltd [ASX:RDY] made waves yesterday when it first listed on the ASX. The company defied its sceptics, posting a 17.9% gain on its first day of trading. The company listed at $1.50 per share, hitting a high of $1.80, before closing the day at $1.78.
RDY provides people management software for educators, employers and facilitators of career transitions. The software aims to combine people management, payroll HR admin, work health and safety with behavioural science software.
RDY started life in the late 1990s, providing technology for companies to help disadvantaged people find work. It has since expanded to offer a suite of products covering student management systems, payroll and HR functions and workplace procurement, with the company’s core product being its student management system, which has gained traction with TAFEs and universities.
CEO and 5% holder of RDY, Marc Washbourne, expressed concerns about market volatility and negativity towards tech stocks for downcast investor interest in its IPO.
Institutional investors expressed early concerns about the software-as-a-service (SaaS) company, arguing there were too many red flags to back its listing.
Several fund managers forewent the opportunity to invest, listing several concerns including subdued customer growth and the size of the selldown by ReadyTech’s founders and major shareholders as part of the float.
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Others expressed scepticism around whether or not there were genuinely enough similarities between the company’s flagship student management software and the employee lifecycle.
Mr Washbourne said both the education and employment industries were plagued by outdated software and its counting on massive growth in these industries to fuel his own company’s growth.
What’s ReadyTech’s share price outlook?
Yesterday’s 18% gain would surely have but smiles on the faces over at Readytech but it’s important not to get caught up in the fanfare.
In Australia, the education industry generates about $131 billion per year and has experienced modest growth of 3.5% over the past five years. While its market certainly isn’t small, RDY’s task will be convincing educators to move on from their existing legacy software.
ReadyTech services more than 3600 customers, including the University of Queensland, MECCA Brands and Viva Leisure, with an average retention time of its customers of seven years.
In the education sector RDY will compete against ASX listed tech stock TechnologyOne, which is valued at $2.7 billion.
The company’s prospectus showed it booked $25.6 million in revenue for the 2018 financial year, and a net loss after tax of $5.2 million. It forecasts FY19 revenues will increase to $32.4 million, and has flagged a net loss after tax of $2.4 million.
The first four months of 2019 has seen a number for exciting tech IPO’s, namely Splitit Payments Ltd [ASX:SPT] and Uniti Wireless Ltd [ASX:UWL], both of which posting returns of over 150%. RDY is likely to be a hotly watched stock throughout the year.
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