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MTI Wireless Edge - Expanding irrigation opportunity

MTI Wireless Edge - Expanding irrigation opportunity
Parkland acquisition - accretive to the P&L, strategically valuable

MTI Wireless Edge (LON:MWE) recently announced the acquisition of a 50% stake in Parkland Australia, a value added reseller of MTI's smart irrigation systems.

We are increasing our revenue and earnings per share (EPS) forecasts by 1% for 2019e and 2% for 2020e to reflect the acquisition (table on p2 summarises).

Strategically, the acquisition expands MTI's presence in Australia, a major global market for smart irrigation. We believe that the largest markets for MTI in the irrigation space currently are Israel, North America, South Africa, and China, with Australia adding a potentially significant new avenue for growth.

Overall progress of the business remains strong

We understand that the overall progress of the group remains firmly on track for 2019e. We are maintaining forecasts for revenue growth of 10%, and EPS growth of 26%. Furthermore, we continue to expect an increase in the dividend, representing a dividend yield of 5.7%, and a strong net cash position on the balance sheet.

Revenue growth is driven by positive performance across all three operating divisions. We provide a summary of the three businesses on p2.

Share price - strong performer YTD, but still a very undemanding valuation

The MTI share price has increased 53% from its low point of January 2019. However, the shares remain on a price/earnings ratio of only 8.6x for 2019e and 7.0x for 2020e. With structural growth drivers across all three divisions and a strong balance sheet, we would argue for a P/E of at least 10x for 2020e. As the market continues to become more familiar with the enlarged MTI Wireless Edge (following the August 2018 merger) we see scope for further re-rating.

Year end Dec 31 2017 2018 Current 2020
Revenue ($M) 34.65 35.47 39.52 42.22
EBITDA (US$M) 3.05 3.51 4.49 5.21
EPS ( US cents) 2.3 2.7 3.5 4.2
DPS ( cents) 2.0 1.5 1.7 1.8
Dividend yield 6.7% 5.0% 5.7% 6.0%

Quick facts: MTI Wireless Edge Limited

Price: 40 GBX

Market: AIM
Market Cap: £35.16 m


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MTI Wireless Edge seeing 'continued significant revenue growth and...

MTI Wireless Edge Ltd's (LON:MWE) Richard Bennett discusses with Proactive London's Andrew Scott the group's results for the nine months to the end of September. Revenues increased by 12% in the period to $29mln while operating profit increased 33% to $2.5mln.

on 25/11/19

3 min read