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"Strategically, PSK is enabling MTI Summit to step up the value chain by offering not only components, but also turn-key solutions such as fixed and mobile communication, telemetry and signal intelligence systems. Moreover, MTI's strength and size is assisting PSK in boosting its customer base and involvement in the market, while enabling MTI to offer a wider range of higher-value products to customers. In addition, MTI made $0.8mn of loans to PSK to strengthen its balance sheet and enable the company to take advantage of a strengthening market.
True, MTI’s antennae business did post a small quarterly loss as supply chain issues led to slower fulfilment of 5G backhaul orders to support mobile phone operators roll out their 5G networks. However, the sales opportunities are material. Indeed, Borovitz reports further interest from Tier 1 OEM vendors for its new automatic beam steering 5G antenna which adapts to small movements caused by climate conditions to maintain a stable signal. In fact, he expects another four Tier 1 OEM customers to become customers.
MTI’s share price has risen 35 per cent since my last buy call (‘Bargain hunting in the market carnage’, 7 March 2022), and the shares are now rated on a cash-adjusted forward PE ratio of 17 and offer a prospective dividend yield of 2.8 per cent.This is based on Allenby Capital’s forecastof 12 per cent growth in pre-tax profit this year, a sensible prediction. That’s still a modest rating for a well-capitalised group that makes a 13 per cent post-tax return on equity and is addressing three high-growth market segments: climate change, defence,and 5G backhaul. Buy"
Here's ST's full tip FYI:
"Farming winners from climate change and geopolitical tensions
An Israeli-based technology group is generating strong growth, has a bumper pipeline of tenders,and offers a play on the global food crisis, too
May 23, 2022 By Simon Thompson
First-quarter revenue rises 12 per cent to $11.2mn
Quarterly pre-tax profit up 8 per cent to $0.97mn
Net cash of $6.5mn after $7mn including final dividend, PSK acquisition and exit from Russia
An Israeli-based is generating strong growth, has a bumper pipeline of tenders, and offers a play on the global food crisis, too.The war in Ukraine is not only accentuating the impact of the ongoing energy crisis, but has prompted the governor of the Bank of England to warn of "apocalyptic foodprices", too. Fertiliser prices have more than trebled in the past year, which will feed into sharply higher shop prices, while at the same time the breadbasket of the world is unable to ship 20mn tonnes of grain in storage due to blockades in the Black Sea. To compound matters, global warming is continuing to impact crop yields.
It’s a positive backdrop for Israeli-based technology group MTI Wireless Edge (MWE:65p), which could yield significant sales of its cutting-edge Mottech's real-time irrigation monitoring,control and reporting software. That’s because it now offers Viridix’s RooTense sensor that monitors crop root activity and implements an irrigation protocol in real time. On average, the technology saves over 30 per cent in water usage for farmers while also improving crop quality and yield.
Mottech is the exclusive distributor Africa and Australia, where the business already has hundreds of existing agricultural customers, and will promote the integrated solution in other territories as well including France and China. Given that the savings on water usage are high relative to set-up costs – the sensors cost a few hundred dollars per hectare to install –then Mottech should be able to generate a high-income stream by selling the kit, and create a valuable recurring revenue from annual license sales thereafter.
MTI’s water solutions business accounted for 40 per cent of the group’s $1mn(£0.8mn) operating profit in the first quarter of 2022, so is major profit contributor. Chief executive Moni Borovitz revealed during our results call that MTI has “some big projects in the pipeline”, so expect news on new orders from mid-July onwards.
The other key take for me from the quarterly results was the 88 per centincrease in operating profits to $0.74mn from MTI’s Summit electronics division,which represents 40 international suppliers of radio frequency/microwave components.The division is benefiting from January’s acquisition of a 51 per cent stake for $1.2mn in PSK, an Israeli company which specialises in the development,manufacture and integration of communication systems and advanced monitoring and control systems for the Israeli government defence market."
The radio wave tax!!
Good to see the share price react nicely to relatively small buying - hopefully indicates there's not much stock around.
Shore Capital have also updated - they like Allenby retain their 90p target following their recent initiation of coverage, and note that "each of the divisions has growth drivers":
- water management is well placed to see "stronger demand than we forecast"
- the antenna division is "expected to benefit from the rollout of 5G across the world"
- "as long as Israel remains at the forefront of global technology development, we expect Summit to see continued good demand for its products and services"
Allenby Capital retain their 90p fair value, and summarise this Q1 as follows:
"Good Q1 performance; positive outlook"
"Outlook:
Good Q1 performance given the global backdrop – inflation, supply chain
disruption etc. MTI remains well capitalised and there is increased demand across all three divisions. The company’s diversified model, albeit with a core focus on radio frequency communications, remains an attractive proposition given ongoing macro uncertainties."
Https://www.allenbycapital.com/our-research/
Q1 results today show a good performance in what's usually the quietest quarter, with revenues up 12% and EBITDA up 15% despite the well-known semiconductor and general inflation issues.
Above all, the outlook in each division is extremely promising:
- Defence "in particular is growing"
- in 5G there are "new conversations with several key Tier 1 & 2 mobile radio manufacturers"
- Water has "a strong pipeline of potential future orders"
The $6.5m cash pile reflects good cash generation given the PSK acquisition plus the dividend and exit from Russia.
Happy with that.
Helpful, Rivaldo. Thanks.
News today that the Q1 results will be next Monday May 23rd, with an Investor Meet presentation too:
Https://www.investegate.co.uk/mti-wireless-edge--mwe-/rns/notice-of-q1-results-and-investor-presentation/202205170700106863L/
Currency movements are going the right way for MWE. Firstly, the dollar's strength against the pound means that MWE's results reported in dollars - and the significant dividend - will be that much higher in sterling.
Secondly, in 2021 MWE suffered a headwind from the strength of the shekel against the dollar - but this year to date the shekel has fallen against the dollar, i.e a tailwind for MWE.
Shore Capital have initiated coverage on MWE this morning with a 24 page note.
They have a 90p fair value based on "conservative" forecast assumptions "as organic growth is likely to be boosted by bolt-on acquisitions such as P.S.K in January 2022".
Their 90p valuation is based on MWE's peer group average EV/EBITDA of 13.7, which is far above MWE's current EV/EBITDA ratio of 9.7. The peer group's P/E and EV/sales are also well above MWE's - and MWE also provide a "premium dividend yield" at around 4%.
I'll read the rest of the note tonight!
Good to see MWE extending the share buyback programme to March'23, with the capacity now increased to £200,000 maximum:
Https://uk.advfn.com/stock-market/london/mti-wireless-edge-MWE/share-news/MTI-Wireless-Edge-Limited-Update-regarding-Share-R/87820102
As well as the growth in MWE's two divisions covering 5G and water management, I'd have thought that MWE's other division covering tech solutions including defence would be in high demand at present, notwithstanding the withdrawal from Russia - MWE themselves said in the recent prelims that this is benefiting from "ncreased international defence spending".
It is odd there should be so many sells.
Amazing to think that this $500k contract is just for 30 fountains in one city. It's easy to imagine very sizeable revenues indeed once this solution starts to gain traction globally.
Good to see another contract win. The $0.5m isn't hugely material in itself - but the main importance lies in this being the first such win in a new sector for Mottech (drinking fountain monitoring and control).
This is a "new commercial application for Mottech's services, which has the potential to be rolled out in a number of cities".
Given the number of drinking fountains worldwide - and particularly where Mottech's solutions are already deployed - I suspect this could be a big winner for MWE:
Https://uk.advfn.com/stock-market/london/mti-wireless-edge-MWE/share-news/MTI-Wireless-Edge-Limited-Contract-Win/87640128
Indeed Hypermarlin. Congrats to MWE's management for acting so decisively and disposing of the Russian operations so quickly. If only others acted similarly (my personal bugbear are the French - Total, Danone, Renault etc are all operating almost normally over there, with French government backing too):
Https://uk.advfn.com/stock-market/london/mti-wireless-edge-MWE/share-news/MTI-Wireless-Edge-Limited-Sale-of-Russian-Business/87615414
....on wonders what the snr mgmt conversations will have been like between the BOD and the general manager of the Russian operation, I mean esp does the latter chap know what's happening and understand why he's getting a bargain (presumably) and why no-one wants to play with him and his buddies any more.
Great to see Premier Miton buying more - they've gone from 4.98% to over 5%, and now have 4.46m shares:
Https://uk.advfn.com/stock-market/london/mti-wireless-edge-MWE/share-news/MTI-Wireless-Edge-Limited-Holdings-in-Company/87536168
Perhaps it was Miton who bought those 50,000 shares from MWE's treasury.
Good to see an "institutional investor" buying at 57p the last 50,000 shares held by MWE in treasury:
Https://uk.advfn.com/stock-market/london/mti-wireless-edge-MWE/share-news/MTI-Wireless-Edge-Limited-Transaction-in-own-share/87510469
I am very cautious at the moment but have taken the opoortunity of the drop to add. Good long term hold now a dividend is paid...
Good summary by ST, pointing out that MWE are on a P/E of 12 net of the $12.5m of cash (10.7p per share), and that as I posted previously the dollar has surged against the shekel since the year end, which will benefit MWE this year.
Here's his conclusion:
"For example, MTI’s antenna division is feeding off growing demand for 5G network backhaul antenna systems (accounting for 20 per cent of divisional sales) and military antenna (30 per cent of sales). MTI has just received a trial order, from a Tier 1 OEM vendor for its new automatic beam steering 5G antenna. The technology ensures that the antenna automatically adapts to any small movements or vibrations caused by different climate conditions, including wind or temperature, to maintain a stable signal.
The global wireless backhaul market is dominated by seven key OEM vendors which supply radio equipment to the main cellular network operators and support the roll-out of 5G infrastructure. MTI is now working with five of them, and chief executive Moni Borsovitz says that MTI is now in discussions with more potential customers. Although still only a small part of the overall group, accounting for 6.4 per cent of total operating profit, Borsovitz expects the antenna business to report robust growth this year.
He also outlined strong drivers for MTI’s wireless water management systems division, which reported a 7 per cent rise in annual operating profit to $2.1mn on revenue of $17.6mn. MTI has just announced a partnership with Viridix, a specialist in actionable data analytics for irrigation that measures the water available to the roots of crops. The technology is being integrated with Mottech's real-time irrigation monitoring, control and reporting software, so that customers can monitor crop root activity and implement an irrigation protocol across farms in real time. The sensors only cost farmers a few hundred dollars per hectare, but can reduce water usage by more than a quarter. It is likely to prove a lucrative recurring revenue stream.
MTI’s Summit electronics division, which represents 40 international suppliers of radio frequency/microwave components, increased operating profit by 15 per cent to $1.85mn last year, buoyed by high levels of government spending on defence. That’s not going to change anytime soon.
I initiated coverage on the shares when they were priced at 40p (Alpha Report: ‘Tapping into 5G and climate change technologies’, 4 September 2020), and the price subsequently doubled in value. Underpinned by a prospective dividend yield of 4.9 per cent, and trading on a cash-adjusted price/earnings (PE) ratio of 12, the shares are priced for a profitable outcome. Buy."
good results as already flagged and a very confident outlook going forward. The 2.8c dividend represents a tasty 4.6% dividend yield at 46p.
Most importantly, 2022 "has begun well for the business with an increased pipeline of opportunities across all three divisions."
And "the macro drivers for our business being the roll-out of 5G networks globally, increased defence spending and ongoing worldwide water shortages, should ensure that there is increasing demand for the Group's products and services."
Also, the shekel has weakened against the dollar since the start of the year so MWE will benefit from positive exchange differences in this H1. Plus there's confirmation that the Russian effect is reasonably immaterial and is now removed.
With around 11p per share in the $12.6m cash pile MWE are on an ex-cash P/E of only 11 or so - extremely cheap imho given the global and sector prospects.
yes, the murk needs to be clarified
I wouldn't be surprised to see sp retest old lower ranges (even 20-30p range again)
re the Russia link Jolly, the russian contract of $3m was due to start second half of 2022,clearly this in doubt now and I'm looking into potential impact re sanctions but currently hard to determine level of revenue from Russia, unless anyone can throw some light on it.....it's a hard task to judge where the fall out from Russia will hit, ie. supply chains, sanctions and business in general pulling out of the country and the likely monetary cost...mwe is a global business with by far the majority of it's revenue away from Russia, so thats a blessing however, realistically any Russian link is a concern currently and pleased as I was with Shore on board as announced yesterday we have to be conscious of why the appointment now. Hopefully MWE can pick up additional business elswhere away from Russia to replace any contract losses that may occur as a result......our issues are nothing compared to the poor people of Ukraine
a great step forward if the trials work, clearly got the attentionof the Teir 1 guys and with the previous statement re 5g development below and the global reach it could be a lucrative aspect....
'Sales of 5G and RFID antenna solutions, being our key growth engines in the antenna division, have overtaken, for the first time, our Fixed Broadband Wireless Application (FBWA) antenna sales. By far the majority of industry's investment in 5G is still to come and so the opportunity remains significant for us and we continue to be well placed with the antenna division being a key supplier to the major mobile network radio manufacturers."
"Looking ahead, we believe that the Company's clear focus on providing radio frequency solutions coupled to being diversified across several markets positions us well to continue to grow and expand through a mix of acquisition-led and organic growth.