Get a fix on…

Finweek English Edition - - COMPANIES & MARKETS - MARC HASENFUSS

AD­MIT­TEDLY, I’ve de­vel­oped a bit of a crush on ve­hi­cle track­ing com­pa­nies: per­haps a ques­tion­able pas­sion, since South Africa’s great­est in­vest­ment com­pany – Remgro – re­cently in­di­cated it was mulling the sale of its stake in Tracker. We don’t know the of­fi­cial rea­son why Remgro is sell­ing one of its long-stand­ing tech in­vest­ments, but the mar­ket’s nat­u­ral steer to­wards cyn­i­cism sug­gests the busi­ness – while un­de­ni­ably sound – isn’t go­ing to gen­er­ate eye-pop­ping re­turns go­ing for­ward.

Per­son­ally, I like busi­nesses that can cash in on our malev­o­lent man­ners and the truth is car theft or com­pany ve­hi­cle abuse (si­phon­ing petrol for re-sale, run­ning a taxi ser­vice on the side, etc) aren’t trends be­ing stubbed out fast.

So MiX Telem­at­ics – which splits its R900m rev­enue into fleet man­age­ment ser­vices (62%) and ve­hi­cle track­ing (38%) – joins Digi­core (see Punts, 9 June) on my radar. I thought the mar­ket might have made more of trans­port con­glom­er­ate Im­pe­rial’s strate­gic thrust into MiX but the share price trades at any­thing be­tween 135c and 150c. That’s well off its all-time high of 205c/share seen in 2008.

What’s to like about MiX? Try 60% of its top line be­ing “high mar­gin” an­nu­ity in­come, 42% of rev­enue gen­er­ated out­side SA (in­clud­ing the United States, Bri­tain and Europe) and strong cash flows (R190m, or 35c/share over its last fi­nan­cial year).

What’s also en­cour­ag­ing was MiX en­joyed a strong sec­ond half in the year to end-March 2011. We suspect that mo­men­tum will con­tinue af­ter the launch of ma­jor new soft­ware plat­forms in Europe, the se­cur­ing of new ten­ders in SA (in­clud­ing Eskom), fur­ther ex­pan­sion into the oil/ gas in­dus­try in the US, plus a ma­jor new prod­uct launch sched­uled for early in this fi­nan­cial year.

It also prob­a­bly won’t be wise to dis­count the value the re­la­tion­ship with Im­pe­rial (which I’d guess could be re­in­forced, over time, with a big­ger equity stake) brings to MiX.

Sim­ply put: track it down at cur­rent lev­els.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.