New Zealand sometimes seems an unlikely place to grow a flourishing tech industry. After all, the country is only connected to the internet by one skinny undersea cable (the Southern Cross Cable), compared to the five that hardwire Australia to the world.
But a string of IPOs over the last two years have opened up a number of strong, growing, (even profitable!), tech companies for investment.
More 'bang' for your buck
Valuations of these companies have been looking increasingly attractive over the last month. Several have suffered falls in share price as investors lose sight of the bigger picture and worry about the timing of growth contracts.
Meanwhile, at a 'macro' level, falling dairy prices have contributed New Zealand's Reserve Bank dropping interest rates, pushing the NZ dollar lower. This has the duel benefit of making Aussie dollars stretch further and push up earnings for NZ tech companies earning revenues from overseas.
There are four companies in particular I would consider adding to my portfolio to take advantage of the situation:
XERO FPO NZ (ASX: XRO)
Shares in cloud accounting company Xero have dropped 8.8% over the last month, despite the company announcing a landmark of 500,000 customers. Xero is rapidly changing the way small and medium sized business operate, streamlining processes and adding significant value to growing companies.
Xero has a strong presence in both New Zealand and Australia, but is focusing on growth in the high density U.S. and U.K. markets and growing reoccurring revenues.
Orion Health Group Ltd (ASX: OHE)
As the healthcare industry (slowly) transitions into the digital age, Orion Health looks to be at the forefront. The company provides systems for electronic health records and hospital information systems with growing international sales exposure and has annual reoccurring revenues of 42%.
Orion Health shares have fallen 11.4% in the last month and are at their lowest level since listing in November last year after the company announced one prospective contract has been put 'on hold'. However 'significant opportunities' have filled the gap. The company will be a strong player going forward.
Gentrack Group Ltd (ASX: GTK)
I have a strong appreciation for Gentrack and its defensive (some might say boring) earnings. The company provides software to water, gas and airport companies and recently announced a mostly flat half-year revenue result. Shares promptly dropped on the result and are down 10.3% in the last month. However with a "record level of current opportunities" to pursue and a generous dividend Gentrack remains an attractive core company.
Spark New Zealand Ltd (ASX: SPK)
Although not technically a 'tech' stock, Spark does own 50.1% of the aforementioned Southern Cross cable connecting New Zealand to the world. To help cement its position in the internet market and facilitate growing demand for data Spark is joining forces with Vodafone and Telstra Corporation Ltd (ASX: TLS) to build an additional 2,300km submarine cable between New Zealand and Australia.
This will keep Spark a dominant provider in the New Zealand telecoms industry and support the company's huge 6% dividend.
