Gentrack Group (ASX:GTK) surged today after reporting FY25 results that significantly beat expectations, more than doubling net profit and strengthening recurring revenue. The market reaction stands out amid widespread weakness across major ASX technology names. Here’s what sparked the rally, how Gentrack compares to sector peers, and why investors may be rethinking midcap software exposure.
While WiseTech Global and Xero dominate headlines with their struggles, a little-known ASX software company just delivered results that make investors kick themselves. Gentrack Group (ASX:GTK) rocketed 22% this morning to $8.10 after reporting FY25 numbers showing net profit more than doubled.
The New Zealand-based company serves two unglamorous but essential markets: utilities billing and airport management. Not exactly tech headlines material. But that's what makes today's results interesting.
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If you've never heard of Gentrack, you're not alone. The company builds software for energy companies, water utilities, and airports to manage billing and operations.
When your electricity company sends you a bill, there's software behind that. When airports track passenger flow through terminals, that's also software. Gentrack makes both.
The business has two divisions. Utilities (the g2.0 platform) grew revenue 7% this year. Airports—called Veovo—jumped 15% and operates across 150 sites in 25 countries.
FY25 results beat expectations. Revenue climbed 8% to NZ$230.2 million. EBITDA rose 18% to NZ$27.8 million. Net profit after tax more than doubled to NZ$20.9 million.
The standout? Recurring revenue grew 13% to NZ$155.4 million—now 67% of total revenue. Investors love recurring revenue because it's predictable and sticky.
The balance sheet is clean. No debt, NZ$84.8 million in cash. Management reiterated midterm targets of 15%+ annual revenue growth and 15-20% EBITDA margins.
The timing matters. Australia's tech sector has been getting hammered lately.
WiseTech Global is down nearly 50% year-to-date, dealing with board resignations and a controversial US$3.5 billion acquisition interest in e2open. Xero fell 30% after announcing a $2.5 billion Melio acquisition that requires $1.85 billion in capital raising and will dilute earnings through FY28.
TechnologyOne, despite solid FY25 results, dropped 17% in a single session last week. The market isn't rewarding ASX tech right now—unless you're showing genuine operational leverage like Gentrack.
What sets Gentrack apart is profit growth, margin expansion, and recurring revenue momentum. While mega-caps wrestle with expensive M&A, this midcap executes quietly in niche markets with less competition.
There's a case for rotation within ASX tech. Large caps trade at stretched multiples and face M&A execution risk. Profitable midcaps like Gentrack are delivering consistent results without the drama.
Gentrack's valuation isn't cheap—around 40-45 times trailing earnings at $8.10. But for a software business posting double-digit recurring revenue growth with expanding margins, that multiple might hold.
The airports division stands out. Global air travel keeps recovering, and airports everywhere need to modernise. Veovo's 15% growth reflects that tailwind, with management noting strengthening pipelines in Europe and Asia.
First, niche software businesses can deliver outsized returns. Gentrack doesn't compete with Microsoft or Salesforce. It dominates specific verticals where switching costs are high and customer relationships last decades.
Second, recurring revenue matters more than ever. In an environment where funding is expensive and growth has to be profitable, recurring revenue models win. Gentrack's 67% recurring mix puts it in a strong position.
Third, sometimes the best opportunities hide in boring markets. Utilities billing isn't sexy. Airport operations software won't get you invited to Silicon Valley parties. But both markets are huge, growing, and underserved by major software vendors.
For investors interested in exploring ASX software opportunities beyond the usual mega-caps, Australian Stock Report's Investing Report provides detailed coverage of growth-oriented technology and midcap stocks. The report includes analysis of sector positioning, valuation metrics, and emerging opportunities across the ASX. Or download ASR's free Top-3 Stocks & Market Outlook Report for a broader view of current market dynamics.
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