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Telit Communications PLC: DEEP DIVE

Telit expects top-end revenues for 2018

In an update in January, the company said that revenue for the year just ended would be at the top end of its guidance range at around US$427mln
Internet of things
OVERVIEW: TCM The Big Picture
Telit's IoT services cover a wide range of sectors including healthcare, retail, and energy

• Enabler of Internet of Things technology

• Provides a variety of services from hardware to consulting for businesses to use IoT

What Telit does

Telit Communications PLC (LON:TCM) is a technology company specialising in the Internet of Things (IoT), the connection of different devices across the web that allows them to exchange data.

It’s the same technology that lets you control the heating from your phone or turn the lights on and off using Alexa, however Telit’s focus is on using the technology to help businesses.

The company’s products, which vary from physical technology modules all the way to consulting services to help companies use IoT, cover a wide range of sectors including healthcare, retail, security, and energy, as well as the development of smart buildings and even smart cities.

Inflexion points

• In February 2019, Telit completed the sale of its Automotive Solutions arm to Chinese firm TUS International in a US$105mln deal that allowed the company to clear its bank debts

• In an update in January, the company said that revenue for the year just ended would be at the top end of its guidance range at around US$427mln, up from US$374.5mln the year before

• In October 2018 the company inked a deal with China Unicom, the Chinese state-owned telecoms operator and the world’s fourth largest mobile service provider, to supply its deviceWISE IoT platform. At the time Telit’s executive chairman Paolo Dal Pinon said the deal was “a key development” in expanding its share of the fast-growing Chinese market

What the broker says

In a note on 28 February 2019, the company’s corporate broker finnCap said the sale of the automotive business to TUS had recapitalised the business and removed “less profitable operations”.

The analysts added that with the US$106mln in cash from the sale, the company would have a net cash position of around US$60mln with the shares having an enterprise value (EV) of just US$160mln.

With finnCap forecasting underlying earnings (EBITDA) of over US$40mln, this given Telit an EV/EBITDA multiple of 4.0x, which analysts said was “extremely cheap given the underlying market opportunity in the exciting IoT markets”.

The broker also has Telit’s stock pegged with a target price of 200p, a 47% premium to its 136p close price on 28 February 2019.

With shares trading at around 137.4p as of 1 March 2019, Telit carries a market cap of £179mln.

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Telit Communications PLC Timeline

Big Picture
March 01 2019

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