ASX Watch: Why HSN rocketed up 17% in one day


The market can be a strange place…

Some days, absolutely nothing happens. Then suddenly, as if out of nowhere, a company can rocket up like a surface-to-air missile.

This is what happened between the hours of 10am and 12pm on Thursday.

Ever heard of a company called Hansen Technologies?

You’d be forgiven if not.

Hansen Technologies Limited [ASX:HSN] has a market cap of $607 million and a seat in the top 300 stocks on the ASX. So, while it’s not a small stock, it’s not exactly a household name, either.

But in a two-hour window on Thursday, it went boom. It certainly surprised the market as investors piled in.

So, what happened?

Firstly, it’s helpful to understand what HSN does…

A global tech company with millions of customers

Hansen is a global provider of customer care and billing solutions. It develops, integrates and supports billing systems for the world’s top telecommunications and utility companies.

After 48 years in the business, millions of people around the world rely on HSN for secure, accurate and reliable billing solutions.

In 2018, HSN hit a bit of a slump. It reported a decline in profits due to a drop in recurring revenue. And currently, recurring revenue represents over 60% of total revenue.

You can see this decline reflected in the share price in the following chart:

Source: Optuma

Now, bearing those falls in mind, it’s no wonder investors took notice when the share spiked a whopping 17% in a single morning.

So, what happened?

Let’s find out…

The catalyst that sent HSN soaring 17%

On 1 May, HSN announced the successful acquisition of Sigma Systems.

Sigma is a leading provider in software products for telecommunications, media and technology companies.

Servicing over 70 companies in 40 countries, HSN now boasts a massive new range of clients, including Telstra and Vodafone, which should boost its bottom line.

Investors clearly liked this news.

Hansen Technologies now plans to cross-sell services between both companies.

So…the big share price rise could probably be attributed to speculation. Investors have begun to buy up HSN shares in anticipation of growing future revenue.

If the company can prove that the new acquisition will improve overall profits, there may be more share price rises ahead.

Fast and active moves like this are often found in small-cap shares on the ASX. If you have not yet seen Callum’s latest report on his favourite way to play these kinds of moves, check it out here

Best regards,

Jim Rickards Signature

Jonathan Evans,
Analyst, Profit Watch