In recent months, new contract wins have resulted in significant share price growth for many companies in the IT services sector. After a number of years of under-spending it appears the cyclical component of IT is finally picking up. There is also a structural shift in IT towards more cloud-based applications and new IT technology, replacing the former labour for hire consulting model. Since the GFC a number of Australia’s largest corporations and state/federal governments have cut their IT budgets, but there comes a time when old systems need to be replaced.
Confirmed earnings guidance and new contract wins have seen the UXC share price grow from $0.735 to $1.03 since the start of July. Although we have had a Buy recommendation with a $1.10 valuation, we didn’t include the stock in the model portfolio.