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A closer shift into the digital economy

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Are you investing in Tech stocks?

A number of investors around the world have started eyeing out tech producing and tech service providing stocks, with more companies expanding their businesses in this space too.

As we shift to the 4th industrial revolution, tech stocks are at the forefront of the transition.

Acceleration of Technology.

The catastrophic impact of the global pandemic has accelerated the global tech transition as many companies require more technology to operate with less human contact, while not hindering productivity. Working from home was one of the biggest contributing factors in the acceleration.

The Internet of Things (IoT)

The unfolding of IOT created a profitable environment for tech companies.

Here’s a look at the current developments of some JSE tech stocks:

Etion Limited (ETO)

For Etion to reposition itself in the tech industry as a technology investment holding company, the group intends to restructure; this restructuring includes the disposal of its 100% stake in Lawtrust, valued at R245 million (purchase consideration).

The company reported a 20% increase in revenue to R692.1 million on March 31st, 2021, vs R572.9 million of the previous corresponding period (PCP). This included the disposal purchase consideration of LawTrust. EBITDA increased to R101.8 million from a loss of R9.6 million, and profits after tax of R52.6 million, representing a 245% increase from the R36 million loss in the PCP.

Delivering solid results, the group’s headline earnings grew by 1171% to 9.36 cents per share from a loss of 0.87 cents per share. Revenue from continuing operations increased by 21% to R419.3 million, with a decline in operating expenses of 38% to R88 million, mainly due to the R40 million restructuring costs.

Outlook

After the resurgence in connectivity products driven by working from home; Etion, through its Operations Etion Connect, Etion Digitise, Etion Create, and Etion Secure, see the potential for growth, especially through organic growth, and expanding its footprint into the rest of Africa.

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4Sight Limited (4SI)

Trading just below 50c is 4Sight, another 4IR driven company with a diversified portfolio in the tech space. The group, through its subsidiaries, has operations in various nations. These operations are spread across the African, Middle East, and Europe regions with partners including giants like Microsoft, Siemens, AspenTech, to mention a few.

Starting its FY21 on a positive note, 4Sights revenue for the FY20 year-end results was up by 1% to R523.8 million. A 14% devaluation on the Rand against the dollar during the competitive period resulted in a 6.7% decline in US-based figures.

While revenue and operating expenses were down by 6.7% and 7.6% within the period to $31 million and $19.5 million, respectively, profits after tax from the group’s continued operations increased by over 100% to $1.8 million from $544 712 the PCP.

4Sight returned to profits with earnings surging by over 100% from losses of $3.68 per share to $0.08 earnings per share; the group’s headline per share for the period was sitting $0.04 per share.

To recapitalize, the group disposed of 100% of its Digitata Limited stake. The disposal was completed 4th quarter of 2020. And despite the harsh trading conditions, the group managed to increase its cash balance by 41% to R66.3 million ($4.5 million in USD terms) from R46.7 Million.

Outlook

4Sight has become a 5.0 company that’s focused on enabling its clients to become 5.0 enterprises. The group’s CEO further added that 4Sight is set to expand strongly beyond the South African borders, adding to the existing 12 countries where its alliance partners represent the company.

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Roundup

With the demand increasing for more tech products in workspaces, homes, and various other environments, younger companies within the tech industry may see a demand in their products, moving losses to profits.

This opportunity may enable many small companies to expand their footprint into new jurisdictions to capitalize on the new digital era. At the same time, competition in the tech industry has also started to gain momentum that may significantly impact the prospects of smaller companies.

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Sources – EasyResearch, JSE Sens, Etion Limited, 4Sight Limited

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