Money Talks: Tech and property funds management are this expert’s top picks
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Money Talks is Stockhead’s regular drill down into what stocks investors are looking at right now. We’ll tap our extensive list of experts to see what’s hot, their top picks and what they’re looking out for.
Today, we hear from David Keelan, co-portfolio manager at Ellerston Capital.
While Keelan’s specialty at Ellerston Capital is microcaps and his approach a bit more “generalist”, he does see potential in the tech space right now.
“Given where interest rates are, the low-level of growth and the low Aussie dollar, probably the best performing sector, no surprise, is the technology sector,” Keelan told Stockhead.
“Basically, we’re looking for Australian companies that have a voice in the global market and have a reason for being and sufficient scale and balance sheet to see them through.
“In our space everything is very stock specific.”
One stock that Ellerston owns and is a substantial holder in is Melbourne-based Atomos (ASX:AMS), which makes and sells camera add-ons for amateur Instagrammers and professional photographers.
This company was flagged by one of Stockhead’s other experts, Dean Fergie, director and portfolio manager at Cyan Investment Management, back in April.
At that time, Atomos’ share price was around 93.5c, but since then it has spiked over 55 per cent to trade as high as a $1.45. Right now it has a market cap of just under $150m at a share price of $1.03.
Keelan said Atomos is generating around $50m in revenue and witnessing strong double-digit growth.
“Content isn’t just produced by the big companies anymore, it’s produced by anyone, and Atomos’ device fits onto a normal SLR camera and helps with editing, production, and it turns that raw file quite easily into a pretty good kind of commercial output,” he explained.
“To give you some context, there are around six global camera manufacturers and they all have their own code, their own language.
“The Atomos device sits on top of the camera and it’s agnostic to all six majors.”
Atomos also has a perpetual licence signed off by Apple co-founder, the late Steve Jobs himself.
This means Atomos’ device is compatible with Mac computers for editing, compression and making good videos to upload on YouTube or other broadcast platforms.
Atomos is also branching out into the second tier film production market, according to Keelan.
“So Netflix is one of their biggest customers at the moment as well,” he said.
Another tech pick of Keelan’s is Rhipe (ASX:RHP), which provides wholesale of subscription software licenses to IT service providers in the Asia Pacific region.
Most of these software subscriptions are for products from leading software sellers like Microsoft, VMware and Citrix.
Rhipe has a market cap of around $330m at a share price of $2.44.
Ellerston has held Rhipe shares for the past two years. Since about mid-2017, the company’s share price has rallied 388 per cent.
“Microsoft has 500 resellers around the world, and it has around 11 top tier one resellers, which are called globally managed partners, and Rhipe is the smallest of the globally managed partners,” Keelan noted.
“These are billion-dollar companies and Rhipe is a couple-of-hundred-million dollar company.
“As Microsoft continues to outsource a lot of their distribution, Rhipe has been benefiting and as people move to the cloud, Rhipe has been benefiting.”
Keelan also likes property funds management business Centuria Capital (ASX:CNI), which has a market cap of $657m at a share price of $1.69.
He likens the firm to a “mini Charter Hall” (one of Australia’s leading fully integrated property groups).
“It has a number of listed property funds and then it has a big quality unlisted consumer platform,” Keelan said.
“It has a good management team. They’ve executed a great growth strategy, both via acquisition and via pure organic means, and in a market where interest rates are going lower.”
David Keelan joined Ellerston Capital as a dealer in 2008 and transitioned into an analyst role within the Small Caps team. He advanced to the role of portfolio manager of the Australian MicroCaps fund in 2017.
Keelan has 13 years of experience as an investment analyst and prior to joining Ellerston, heworked for UISL/Old Mutual in the UK for four years in a senior dealing role.