WFH is here to stay. But which ASX stocks will stay to benefit?
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Australians will continue to work from home (WFH) way beyond the pandemic – at least that’s according to the latest data out of the Australian Bureau of Statistics (ABS).
In the latest survey, the ABS reported that 30 per cent of Australian businesses have had staff working remotely in the past year, with 45 per cent of those experiencing improved staff wellbeing as a benefit.
The survey also said that 80 per cent of these businesses will continue to permit employees to work remotely over the longer term.
With these massive societal changes taking place, Stockhead has compiled below a list of ASX small caps that have benefitted from the COVID story, and which might continue to do so in the future.
We’re talking about data centres & networks, cybersecurity, home office furnishings, and the telehealth segments.
The list below is by no means exhaustive, but gives a picture of where the best performing stocks might be in those segments, and heading into our WFH future.
|TICKER||COMPANY||SEGMENT||SHARE PRICE $||% 1-YEAR RETURN|
|5GN||5GN Networks||Data centre||1.14||27|
|TPW||Temple & Webster||Home office||10.66||196|
|NCK||Nick Scali||Home office||10.7||149|
The pandemic has forced companies to explore the viability of shifting employees from expensive physical offices to virtual cloud offices. Data centres play a crucial role to the virtual office, as they serve as a central point of access for data and applications.
Here are some data centre small caps that may do well over the longer term if WFH becomes permanent.
Nexion Group (ASX:NNG)
The hybrid cloud provider is a private cloud infrastructure integrated with the public cloud services, to form the Nexion Hybrid Cloud solution it calls OneCloud.
Experts believe that a hybrid cloud offering, such as OneCloud, provides a better service than a traditional data centres, and has recently become the default choice for companies.
Nexion works with international giants like IBM, and has just announced a solid first quarter since its highly successful IPO in February – with total revenues increasing by 38 per cent.
5G Networks (ASX:5GN)
The company owns and manages critical infrastructure; which is connected via market leading 100Gb links to 100+ data centres, global networks and the 5GN Cloud platform.
In 2020, it conducted a fibre rollout and network expansion across Australia’s capital cities to to enable on-net connectivity to 80 data centres.
In the latest quarterly filing, its total revenue, which includes from the recently acquired WebCentral, topped $40 million.
This is a pureplay data centre company, which builds, owns, and operates data centres.
The company’s strategy revolves around its edge computing technology, which brings computation and data storage closer to the end users, where it can save bandwidth and imporove response times.
It has identified opportunities for its services in regional and remote areas of Australia, as well as the Asia Pacific region. The company has brought in a 35 per cent increase in its cash receipts so far this financial year.
It goes without saying that security goes hand in hand with data servers, so cybersecurity is really an extension of the data centre segment.
We have identified three cybersecurity stocks that might also do well.
This data-centric security technology company will prevent malicious and accidental loss of information for its clients.
The company has continued its market expansion recently, entering into new sales regions in the US, Europe, and Singapore.It also recently secured a contract with the Australian Department of Defence.
These deals have underpinned the company’s record quarter, in which it delivered an 84 per cent increase in revenue.
archTIS products include Kojensi, a multi-government certified platform for the secure access, sharing and collaboration of sensitive and classified information.
This high-flying company has been the most successful cybersecurity stock on the ASX, with its share price almost quadrupling over the last 12 months.
Its stated mission is to be the sovereign cybersecurity provider of choice for the protection of Australia and New Zealand’s digital assets.
The company has over 1,000 customers in its books, and is currently the largest cyber security provider for the Australian federal government. It also works with other sectors such as the energy and financial services sectors.
The company has just announced a record quarter, with operating EBITDA of $1.7 million, up 21 per cent on the pcp.
Whitehawk is the first global online cyber security exchange marketplace. The company offers an online tool that enables small and midsize businesses to take immediate action against cybercrime, fraud, and disruption.
According to the company, the cost of cybercrime in Australia alone is estimated to be $29 billion a year. Since the pandemic began, the company has been focusing on the US federal government market, winning several contracts that include one with the US Department of Homeland Security.
Hubify is a newcomer within the cybersecurity space, having just entered the segment last week, after announcing a stake in defence-grade cyber company, Internet 2.0.
The strategic agreement will enable Hubify to diversify its revenue base, by providing defence-grade cyber security solutions to its 7,000 SME customers, as part of its new cyber security offering to be known as CyberHub.
This segment is an obvious one that will boom as more people look to improve their home surroundings as they spend considerably more time inside it.
Temple & Webster (ASX:TPW)
This company is a pure play online retailer, and its sales have surged significantly during lockdown periods.
TPW has invested heavily in its technology, launching its artificial intelligence-generated room ideas on the iOS app platform. The app could become a game changer as more people transition to online purchases for furnishings.
The last half shows the company’s revenues growing by 118 per cent to $161.6 million.
Nick Scali (ASX:NCK)
We’ve all seen Nick Scali’s retail stores, but its online platform is starting to gain popularity, with online sales soaring during the pandemic.
The company has plans to expand its ANZ footprint by opening 85 new showrooms across both markets over the coming years.
Its share price has almost tripled in the last 12 months, and the company has been paying dividends consistently since 2010.
Medtech stocks that might play well to the WFH story over the longer term are those that focus on the mental wellbeing of employees.
This US-based company offers software that helps businesses keep their workers happy. Among other things, it measures employee inclusion, engagement and satisfaction.
Its software is sold in over 100 countries, and has increased revenue by 19 per cent to $57 million in the full year FY20. Importantly, 97 per cent of the revenues is recurring.
This is one stock that plays well to the COVID story. Its flagship product is Ilumen, which is corporate mental health software that provides an employer with aggregated data to measure the mental wellbeing of its workforce.
The company recently won a CE Mark approval for its MEBSleep software, which allows it entry into Europe, but is still waiting for US FDA approval.
Total Brain (ASX: TTB)
The SaaS platform helps users to scientifically measure and optimise their brain capacities while managing the risk of common mental conditions. The company has a major contract in place with US giant IBM since 2019.
This segment might not be too obvious, but it is bound to play a critical part in the WFH story.
We’re talking about tin.
The global pandemic has caused demand for tin to drop sharply in 2020, and a number of smelters in Asia and South America were forced to shutter. But that all changed thanks to the WFH movement, and demand for tin – whose top use is as solder in electronics – has soared.
Parts of the world seem to have run out of the metal, and a market squeeze in tin seems to be at play right now. The tin price is currently trading at US$28,300, nearing its all time high.
There are a number of Australian tin companies on the ASX that have projects, including Australian Tin Mining (ASX:ANW) with its Taronga project in NSW.