About: Hansen Technologies Limited is a global provider of billing software, customer care, data management and catalog driven technologies. They predominately develop, support and integrate billing systems software for the telecommunications, pay-TV and utilities industries. The company employs over 1500 globally and services more than 600 clients in over 80 countries around the world.

Why it’s in the portfolio: The IT sector tends to be split between expensive market darlings and cheap fallen angels while Hansen occupies a notable middle ground having quietly grown earnings by 15%-20% per annum over the last 15 years yet remains on a price multiple only modestly above that of the market. Growth 'these days is hard to find, especially that of the lasting kind' and in general the market is often overly enamoured with the high flyers only to throw the baby out with the bath water when there is an inevitable disappointment. This seems to have been especially true of the last two years and this tendency is unlikely to abate in the less confident market we have seen so far in 2018 and 2019. In that environment we think a solid performer with robust cash flow on a reasonable multiple makes more sense than something with more blue sky potential.

Fundamentals: Hansen technologies is trading on forward looking multiple of around 17x and the market expects mid to high single digit growth in the medium term. On that basis it appears fair value although it has seen an acceleration in top line growth and free cash flow in the last year and it has consistently exceeded these expectations in the past. We therefore think there is room for upside while low levels of debt and a modest pay-out ratio give them some room for manoeuvre.

What could go wrong? This remains a relatively small company which can be adversely affected by the whims of investors in the face of bad news. They have also acquired carefully in the past although the latest acquisition was relatively expensive which could lead to some uncharacteristic corporate indigestion.