Tracsis profits from rail ambition

North America is not a region known for its extensive or modern railway infrastructure – but this means there’s plenty of opportunity in the region for specialist software firm Tracsis (TRCS). The group acquired RailComm, a New York-based rail technology group, in spring last year, and credits the new division with helping to drive its FY23 revenue growth.

According to Tracsis, the North American rail industry is actively looking for new technologies to help it realise much-needed operational efficiencies. It expects near-term growth to be driven by its computer-aided despatch, yard automation and remote condition monitoring products. 

Here in the UK, ongoing industrial action has dominated discussions of the industry, but doesn’t seem to have done much to dent demand for Tracsis’ products. In the year to the end of July, the group won two contracts for its pay-as-you-go smart ticketing solutions, including the country’s first contactless bank card deployment outside of London. Both systems are due to go live in the current financial year.

Elsewhere, revenue in the group’s data, analytics, consultancy and events division was up 14 per cent to just over £44mn. According to CEO Chris Barnes this part of the business – which provides ticketing and traffic management services – is a legacy of a previous managerial regime. It does, however, mean the group has access to potentially lucrative datasets.

“The way we simplify our business model is […] you're basically investing in a real technology business that has a big data platform,” he explained. “And that big big data platform is going to open up a whole array of new opportunities and service offerings.”

Tracsis’ shares trade on 18.2 times forward earnings for FY24. We’d argue this valuation is justified by the ongoing need for digital transformation in the rail sector. Buy.

Last IC view: Buy, 890p, 3 April 2023