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Finweek English Edition - - Companies & Markets - MARC HASEN­FUSS

SINCE BE­ING UN­BUN­DLED out of Con­trol In­stru­ments, ve­hi­cle tracking spe­cial­ist MiX Telem­at­ics has en­dured a rough ride on the JSE. How­ever, last week saw some spec­u­la­tive in­ter­est in its shares fol­low­ing the release of some en­cour­ag­ing num­bers for the year to end-March 2009. At the time of writ­ing MiX had bro­ken through 80c – which was well off its an­nual low of 33c/ share seen in Fe­bru­ary this year.

The lat­est re­sults are ap­peal­ing. Bot­tom line prof­its came in at R69m off turnover of R958m. That trans­lated into earn­ings of 10,6/share – 15,9c/share if we dis­re­gard ad­just­ments at the com­pany’s Om­nibridge sub­sidiary. Most im­pres­sive is that earn­ings are of top qual­ity, with op­er­at­ing prof­its of R135m more than matched by net op­er­at­ing cash flows of R139m. That should leave no ques­tions about whether MiX can af­ford to pay its share­hold­ers a div­i­dend.

While SA’s ve­hi­cle tracking mar­ket is com­pet­i­tive and trad­ing con­di­tions are likely to re­main tough, MiX does of­fer some com­fort in the fact its an­nu­ity rev­enue grew by 21% to R419m in the year to end-March 2009. That means an­nu­ity-based rev­enue makes up around 44% of to­tal rev­enue.

MiX also holds a size­able global foot­print and, over the re­view pe­riod, for­eign rev­enue in­creased 45% to R426m. That mas­sive growth in for­eign rev­enue didn’t come at a huge cost, with net trad­ing mar­gins only shift­ing down slightly from 23% to 21%. Pre­sum­ably, as the rand weak­ens against ma­jor cur­ren­cies the mar­gins on for­eign con­tracts will fat­ten sig­nif­i­cantly.

Cur­rently, MiX car­ries a mar­ket cap­i­tal­i­sa­tion of R560m, which seems a tad mod­est, with ad­justed head­line earn­ings com­ing in at just more than R100m and head­line earn­ings at R80m.

Just by way of com­par­i­son, un­listed ve­hi­cle tracking spe­cial­ist Tracker – which is con­trolled by WesBank and Ven­Fin – car­ries an in­ferred value of around R2bn. Tracker gen­er­ated earn­ings of around R150m in the year to end-June 2008. Based on Tracker’s earn­ings-to-in­ferred value mul­ti­ple MiX should per­haps carry a mar­ket cap­i­tal­i­sa­tion of be­tween R800m and R900m. That would trans­late into a price of be­tween 125c and 135c/share.

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