Market Embraces Hansen’s Powercloud Surprise

This story features HANSEN TECHNOLOGIES LIMITED.
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The company is included in ASX300, ALL-ORDS and ALL-TECH

After a shaky start, Hansen Technologies' powercloud acquisition has turned the corner, delivering a positive surprise to analysts and investors.

-Hansen Technologies' FY25 guidance upgrade eases investor jitters
-Margin recovery, cost control drive earnings surprise
-German market and new contracts offer upside potential
-Analysts upgrade earnings and target prices, citing valuation appeal 

By Danielle Ecuyer

Management’s FY25 earnings upgrade boosts sentiment

Investor sentiment about the immediate future for Hansen Technologies ((HSN)) has been fragile ever since the acquisition announcement of Germany’s powercloud in February last year.

Let’s just say the way the deal had been communicated could have been executed better, in particular the need to make additional investments into product development in order to stabilise the freshly acquired business proved an unwelcome negative surprise.

Then in February this year, the company’s first half earnings report revealed revenue rising by 6% on a year earlier and underlying earnings declining by -27%. Not what the market was expecting.

Interim results showed powercloud had generated an additional loss of -$7.5m on top of the loss on consolidation for five months in the FY24 result of -$10.2m.

At the time, Hansen management reiterated FY25 guidance, but a skeptical market sold down the shares, discounting another likely earnings disappointment.

More than four months later, Hansen shares were still trading circa -17% below their price level in February, significantly underperforming the broader market that had posted a sharp recovery off the April lows.

This week, management’s update on FY25 earnings (EBITDA) guidance laid to rest market and investor jitters around the powercloud turnaround. A quick rally has pulled the share price back to where it was in February.

Shaw and Partners has repeated its view that guidance at the time of the February interim results was “conservatively” framed, even if revenue came in lower than flagged.

Having covered the stock for over a decade, Shaw and Partners’ analyst was keen to stress management has a track record of conservative guidance, which has yet again been vindicated with this week’s guidance upgrade.

Hansen announced a lift in FY25 cash earnings (EBITDA) by 16% at the midpoint to around $93m from $76m-$85m, resulting from improved operating efficiencies, better cost management and a positive contribution from powercloud, which is performing ahead of expectations as detailed at the time of the acquisition in February 2024.

Guidance upgrades and what it means for Hansen

UBS points to revenue guidance of $392m versus prior guidance at $398m-$405m, which can be attributed to delays for new project starts with circa -$10m in revenue deferred into FY26.

The UBS analyst comments against such an uncertain global macroeconomic backdrop, Hansen will deliver core revenue growth of 5% on FY24 and cash earnings (EBITDA) growth of 20%.

Within the context of Hansens’s defensive earnings profile, due to the contract exposure to communications, energy and utility sector customers, which underwrites modest organic growth at best, UBS suggests FY25 looks set to represent a “very solid outcome”.

Moelis, which initiated coverage of the stock back in April with a 12-month target of $6 and a Buy rating on the back of an expected turnaround in powercloud, must feel quite vindicated.

At the February interim report, Hansen announced a five-year contract with VMO2 worth around $50m, with some $15m in VMO2 license revenue to be recognised upfront in 2H25.

Moelis explains a short-term boost to margins from the $15m license sales, but FY25 guidance infers operating efficiencies and cost management were the primary drivers of improved earnings and margins, which does not rely on licensing revenue, which can be variable and challenging to forecast.

Management did not offer explicit FY26 guidance but stated there is a “solid pipeline of committed business”. 

Recent customer wins for the company include a four-year agreement with Vattenfall for Hansen CIS in Finland worth $5.5m; as well as an agreement with a Nordic business-to-business energy retailer, A Entelios, to use Hansen CIS to support its expansion into the Danish market; and a five-year agreement with one of the largest renewable energy portfolios in the US for an estimated contract value of $16m.

Morgan Stanley emphasises the earnings upgrade was strategically significant for the company, as it exemplifies the “sharper and earlier” turnaround in powercloud, which reinforces management’s track record of making bolt-on acquisitions of reasonably valued assets to boost growth.

Equally, the analyst considers the market to be ignoring the upside potential from new contract wins in the German market, which is very large and thus offers opportunities.

The analyst predicates its positive view on the large global total addressable market, estimated at US$10bn-US$15bn, which is spent annually on billing and customer care software across the utility, energy and telecommunications sectors.

Organic growth rates might be gradual due to the mature nature of these industries, but Morgan Stanley counters there is substantial change happening with major structural challenges in decarbonisation and digitalisation.

Even though Hansen’s exposure spans 80 countries, the business remains a relatively minor participant representing only circa 2% of global market share. Morgan Stanley views strategic bolt-on acquisitions as allowing the company to grow, with an historic track record of 10% annual compound growth rate in cash flows over the last five years and a low customer churn rate at circa 1%.

Morningstar’s analyst is more circumspect around Hansen’s growing reliance on acquisitions for growth, pointing to rising competition from larger buy-and-hold companies such as Constellation Software, resulting in fewer opportunities.

Valuation appeal for a software/tech company underwrites Buy-ratings

Turning to brokers’ earnings forecasts, management’s new guidance has triggered across-the-board upgrades.

Morgan Stanley boosts FY25 EPS estimate by 14.3% and 1.1% for FY26; Shaw and Partners expects more detailed FY26 guidance at the August earnings announcement, so leaves its FY26 estimate unchanged while lifting FY25 cash earnings (EBITDA) forecast by 13% on lower expected revenue by -2%.

For Morgan Stanley, Hansen screens as one of the “least expensive but profitable” software/technology stocks on the ASX. An Overweight rating (Buy-equivalent) thus remains in place with a target price of $6.50.

UBS lifts EPS estimates by 16% and 2% for FY25FY27, with an expected 3% rise above the previous FY26 cash earnings (EBITDA) forecast by 3% on margins of 24.7% versus 23.8%.

Group revenue growth of 5% for FY26 is flagged, including 6% growth of $20m from Support & Application revenue, flat revenue from powercloud, around $7m of license sales and $3m for the Conuti acquisition.

On FNArena’s updated consensus projections (see Stock Analysis), Hansen Tedchnologies’ earnings per share are expected to improve from 10.4c in FY24 to 22.8c in FY25 (August) and to 27.4c in FY26 (next year). The annual dividend for shareholders is expected to remain 10c.

UBS’ target price rises to $7 from $6.55 with an ongoing Buy rating due to an appealing valuation against defensive/resilient earnings streams.

With return on capital of 20% above the weighted average cost of capital, this broker believes Hansen has the potential to generate net cash on its balance sheet, which could open up “non-organic” growth opportunities.

Moelis anticipates powercloud to grow in FY26 as the German energy market’s transition evolves with the ongoing rollout of smart metres. This broker also flags a cost out of -$31m on an annualised basis, with anticipated breakeven for powercloud a tailwind for earnings in FY26.

Moelis retains a Buy rating but points to increased competition from larger competitors like SAP and Oracle as a challenge to maintain market share, as well as from other competing platforms which have been gaining share.

Still, this broker maintains an undemanding valuation makes the stock attractive relative to peers. Target price set at $6.60.

Daily monitored broker Ord Minnett upgrades FY25 EPS forecast by 30%, with FY26 and FY27 lifted by 1.9%, resulting in a rise in its target price to $7 from $6.80.

Morningstar’s fair value is raised by 10% to $4.60, with this analyst emphasising the market is overestimating the company’s longer-term growth prospects due to the mature nature of the billing software markets it is exposed to.

For related reading at FNArena, check out the prior update on Hansen Technologies:

https://fnarena.com/index.php/2025/04/01/hansens-powercloud-ready-to-perform/

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