NextDC is the biggest data centre stock on the ASX and the second biggest company in the entire Oceania region after Equinix. It has had an unparalleled record of success in the last decade, growing its market cap from $80m to over $6bn!

It was founded in 2010 and expanded on (correct) anticipation that more data centres would be needed, above and beyond what consumer telcos could provide. Although they cost a lot of upfront capex, they can generate revenue very fast once complete.

Fast forward to today and NEXTDC made $362.4m in revenue and $193.7m in EBITDA, all from 17 data centres. Impressive considering it didn’t even have one data centre operational at its IPO.

For FY24, consensus estimates predict $418.2m in revenue (up 18%) and $214.3m in EBITDA (up 10%). Looking to FY25, analysts call for $486.6m in revenue (up 16%) and $267.4m in EBITDA (up 24%). Estimates for NEXTDC expand all the way to FY32 by which time the company is expected to have $1.8bn in revenue and $1.2bn in EBITDA, both way higher than today!

Xero offers software that helps SMEs do business. It has over 3 million subscribers, and primarily sells accounting software that helps businesses keep books, pay bills and send invoices. But it has gradually developed features useful beyond book-keeping, such as storing files, converting currencies, keeping track of inventories and creating professional quotes.

Clearly, Xero is an essential service to its customers….it’s very hard to switch it off just to save a few bucks. And what incentive is there to switch to another solution like a MYOB? Very little. Whatever few bucks would be saved, would be lost in the long run. Xero’s tools are estimated to save its customers on average 5.5 hours of manual work per week. We guess that is why its churn was only 0.9% in FY23, even amidst inflation.

The company believes it can grow further. It is aiming to double its revenue to NZ$3bn by FY27 and has told investors that the TAM (Total Addressable Market) is NZ$100bn. This might even be an understatement because that is just the top 3 jobs its software is used for – Accounting, Payroll and Payments. Adjacent Tasks, including other tasks such as inventory, CRM and project management, could be another $39bn.

ReadyTech is a provider of SaaS technologies in Australia to the education, government and corporate sectors. Its offerings include (but are not limited to) asset management, property, licensing and compliance, finance, HR and payroll, and customer management products.

The company made $130.3m in revenue in FY23 and is aiming for $160m in FY25, a target initially set for FY26 but bought forward at its 1HY24 results. ReadyTech has advised shareholders to expect organic revenue growth for FY24 to be in the mid-teens and a 34-35% EBITDA margin.