Company Reports

Slow organic revenue growth and declining margins in first-half fiscal 2024 are in line with recent results and our expectations for narrow-moat Hansen. Revenue grew 12% on the prior corresponding period but was significantly aided by growth in highly volatile license revenue. Excluding this, revenue grew just 2% from the prior half, which is low for a largely recurring revenue business model. Guidance is for second-half revenue in line with the first half, implying a midteens organic growth rate for the year.

We expect Hansen’s strategy to focus on pursuing inorganic growth opportunities, either through geographic expansion of existing functions or expansion into new functional adjacencies.

We initiate coverage on Hansen with a fair value estimate of AUD 3.85 per share and a narrow economic moat rating. We view Hansen as a company whose products have high switching costs and whose customers are of high quality. However, we see limited organic growth opportunities nor do we expect meaningful contribution from inorganic growth opportunities. We forecast revenue to grow organically at a 10-year CAGR of 4% over the next decade and EBIT margins to remain flat at 18%. We use a weighted cost of capital of 8.7%. We assign Hansen a Morningstar Uncertainty Rating of Medium and a Capital Allocation Rating of Standard.

We expect Hansen’s strategy to focus on pursuing inorganic growth opportunities, either through geographic expansion of existing functions or expansion into new functional adjacencies.