Get a fix on…
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.