Mixing it up
For me, the standout set of results in the past fortnight is the exhilarating year to end-february offering from vehicletracking and fleet-management specialist Cartrack. But as impressive as the financial statements are — reflecting strong cash flows, improving margins and robust subscriber growth — Cartrack has, believe it or not, lagged its rival MIX Telematics on the JSE of late.
Cartrack’s share price has accelerated 61% over a year, 30% over a sixmonth distance and has pretty much idled along for the past three months.
By contrast, Mix’s share price has rocketed 147% over a year, 47% over six months and 36% over three months.
MIX recently declared the strongest quarter (to end-december) in its history. Like Cartrack, its subscriber growth is compelling, with 21% year-on-year subscription revenue growth on a constant currency basis as well as almost
25,000 net new subscribers. MIX also delivered record adjusted earnings before interest, tax, depreciation and amortisation of R115m at a margin of close to 26%. Its long-term margin target of 30% looks easily achievable.
Of course, one must also not lose sight of the fact that MIX pulled an awfully smart move two years ago when it embarked on a large, specific share repurchase exercise. In short, it bought back the 25.33% stake or roughly 201m shares owned by mobility conglomerate Imperial Holdings. MIX forked out R474m to Imperial, effectively paying 236c/share.
At that point Mix’s enigmatic CEO Joss Joselowitz noted: “At current valuation levels for MIX shares, we can see no better acquisition opportunity than investing in our own business. We expect that this transaction will be earnings and value accretive for shareholders and view this as an excellent use of our cash.”
Joselowitz was not wrong. Mix’s shares now trundle along merrily at more than 800c on the JSE.
I can’t help but wonder whether there isn’t a fantastic deal to be made between MIX and Cartrack. I concede that the merging of the SA businesses would face competition issues. And both have plenty of organic growth opportunities on their plates. But is there a possibility of a merger of the global operations, with each holding a major stake in an enlarged international business? Such a business would have critical mass in key markets, be more competitive and allow for shared technology advances. It might also find support for a listing on a global bourse.
A potential hitch: two strong personalities (Joselowitz and Cartrack’s Zak Calisto) and whether there is a boardroom big enough to accommodate both these giants of the telematics industry. Anyway, just a thought . . .
I see investor counter RECM & Calibre (RAC)* chose to inform the market that it has bumped up its stake in global investment vehicle Astoria from the previously announced 28.56% to 28.72%.
Big deal, you might say. But RAC reiterated that it is currently assessing its options in relation to unlocking value from its investment in Astoria. Gut feel is that Astoria’s structure in no way fits RAC’S deep-value approach. Presumably “options” would include liquidating the heavily discounted portfolio and building a less mainstream one.
Market watchers, though, have warned that changing the investment mandate (by removing asset manager Anchor) comes with a rather costly poison pill, possibly as high as R90m. The next few months should be intriguing.
An international Mixcartrack business would have critical mass, be more competitive and allow for shared technology advances
Doesn’t the market just love the human resourcing sector? Primeserv’s trading update for the year to end-march puts headline earnings at 22c-23c/share. The company at last count was bid 55c and offered at 65c on the JSE, meaning a forward earnings multiple of about three. Three, people!