Sign up United Kingdom
Proactive Investors - Run By Investors For Investors

Northland Capital Partners View on the City - Starcom (LON:STAR)

Northland Capital Partners View on the City - Starcom (LON:STAR)

STARCOM (STAR.L)

SECTOR – TECHNOLOGY

RATING – CORP*

MARKET CAP – £7.5m

CURRENT PRICE – 2.8p#

TARGET PRICE – 3.7p

ANALYST – MIKE JEREMY

 

Year-end Dec

2016A

2017A

2018E

2019E

 

Revenue (US$m)

5.131

5.440

5.901

6.276

Adj. EBITDA (US$m)

(0.783)

(0.193)

0.485

0.622

Adj. Pre-tax Profit (US$m)

(1.426)

(1.164)

(0.162)

(0.207)

Adj. EPS (US$c)

(1.138)

(0.622)

(0.052)

(0.066)

DPS (US$c)

-

-

-

-

Net Cash / (Debt) (US$m)

(0.92)

(0.57)

(0.05)

(0.14)

P/E (x)

N.M

N.M

N.M

N.M

Dividend yield (%)

N.M

N.M

N.M

N.M

EV/EBITDA (x)

N.M.

N.M.

20.3

15.8

 

SOURCE: Northland Capital Partners Limited estimates. #Priced at prior trading day close. *Northland Capital Partners Limited acts as Nomad and Broker to Starcom Plc and therefore this information should be viewed as a Marketing Communication.

 

Interim FY18 results:  transition underway - Note attached

 

 

NORTHLAND VIEW

§  On 29th August Starcom reported revenue for the six months to 30th June 2018 of US$3.1m, +61% YoY. Gross margin improved from 38.2% in FY17 to 39.7%, driven by sales of higher margin hardware and SAS revenue +14.8%YoY.  The contribution from lower-margin Helios products declined from 58% of hardware segment sales in FY17 to 34%, with higher margin products increasing: Watchlock from 6% to 23%; Kylos from 16% to 24%; Tetis, for shipping containers, at 19% (FY17: 20%).

§  The EBITDA (adjusted) loss was trimmed to US$39,000 from US$283,000 in H117, driven principally by reduced rent and office expenses, whilst the loss at operating level decreased to US$0.51m from US$0.57m in H117.  Balance sheet strength was evident in increased trade receivables (US$1.44m vs US$1.0m in H117), higher inventories (US$2.3m vs US$2.0m in H117) and lower payables (US$1.8m vs US$2.1m in H117).  Continuing rationalisation resulted in closure of the Florida office; selling directly from Israel has proven to be more cost effective.

§  Starcom identified Bosch Connected Devices and Solutions GmbH as the European industrial group with which it entered a strategic collaboration agreement in September 2017. Orders are expected from this agreement in the future. Two strategic clients, CropX and WIMC are expected to continue to contribute significantly to revenue.

Starcom continues its transition to higher margin products indicating FY18 EBITDA profitability, although we expect some additional sales-related costs associated with the addition of larger new clients.  As the transition smooths out we expect Starcom to continue its growth trajectory into FY19. 

COMPANY DESCRIPTION

Starcom Group develops and manufactures technology using cellular and GPS systems designed for tracking vehicle fleets, equipment, people, containers and merchandise.

 

1. Northland Capital Partners Limited (“Northland”) acts as Nominated Advisor and/or Broker to the company.

2. Northland) and/or its affiliates companies do beneficially own 1% or more of any class of the issuer’s equity securities, as of the end of the month immediately preceding the date of issuance of the research report or the end of the second most recent month if the issue date is less than 10 calendar days after the end of the most recent month. 

3. The authoring analyst or any associate of the authoring analyst does maintain a long or short position in any of the issuer’s securities directly or through derivatives, including options or futures positions.

4. Northland, its affiliated companies, partners, officers, directors or any authoring analyst of Northland has provided services to the issuer for remuneration during the preceding 12 months other than investment advisory or trading services.

5. Northland or any of its affiliated companies has performed investment banking services for the issuer during the 12 months preceding the date of issuance of the report.  

6. A partner, director, officer, employee or agent of Northland or any of its affiliated companies is an officer, director, employee or advisor of the issuer.  Disclosures are applicable for all companies

7. The authoring analyst, or any associate of the authoring analyst, has viewed the material operations of the issuer. 

8. The authoring analyst, or any associate of the authoring analyst, received reimbursement for travel expenses.

9. Northland makes a market in the securities of this company.

 

 

DISCLAIMER

This document is provided solely to enable clients to make their own investment decisions. It may therefore not be suitable for all recipients and does not constitute a personal recommendation to invest. It does not constitute an offer or solicitation to buy or sell securities or instruments of any kind. If you have any doubts about the suitability of this service, you should seek advice from your investment adviser. This document is produced in accordance with UK laws and regulations. It is not intended for any person whose nationality or residential circumstances may render its receipt unlawful.

The past is not necessarily a guide to future performance. The value of shares and the income arising from them can fall as well as rise and investors may get back less than they originally invested. The information contained in this document has been obtained from sources which Northland Capital Partners Limited believes to be re¬li¬able. The Com¬pany does not warrant that such information is accurate or complete. All estimates and prospective figures quoted in this report are forecasts and not guaranteed. Opinions included in this report reflect the Company’s judgement at the date of publication and are subject to change without notice. If the investment(s) mentioned in this report are denominated in a currency different from the currency of the country in which the recipient is a resident, the recipient should be aware that fluctuations in exchange rates may have an adverse effect on the value of the investment(s). The listing requirements for securities listed on AIM or PLUS markets are less demanding, also trading in them may be less liquid than main markets.

Northland Capital Partners Limited and/or its officers, as¬sociated entities or clients may have a position, or other material interest, in any securities men¬tioned in this report. Northland Capital Partners Limited does not provide recommendations on securities of firms with which it has a corporate relationship. More information about our management of Conflicts of Interest, Investment Research Methodology & Definition of Recommendations can be found at www.northlandcp.co.uk 

Northland Capital Partners Limited is authorised and regulated by the Financial Conduct Authority and a Member of the London Stock Exchange.

Published by/copyright: Northland Capital Partners Limited, 2013. All rights reserved

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use