I have recently been taking a look at MTI Wireless Edge (LON:MWE), which is a global provider of comprehensive radio frequency communication solutions that serve top-tier customers worldwide.
Currently, MTI’s technologies are used to address: demand for next generation 5G networks; global water scarcity; and increased defence budget spending.
Its portfolio of companies reflects its focus upon innovative technology solutions to meet the growing demand for next-gen 5G networks, address global warming and climate change, and strengthen defence communications.
The company provides bespoke technology solutions for governments and leading corporations, through MTI’s proven record of being the ‘first to develop’ approach, using its own intellectual property and licensed technology from leading partners.
The Business
The Israel-based technology group is centred upon comprehensive communication and radio frequency solutions across multiple sectors through its three core divisions: Antenna; Water Control & Management; and Distribution & Professional Consulting Services.
MTI is a world leader in the design, development, and production of high quality, state-of-the-art antennas.
Mottech Water Solutions, an MTI subsidiary, provides control and monitoring solutions for water and irrigation and is a worldwide master distributor of Motorola solutions.MTI Summit Electronics, another MTI subsidiary, offers consulting, representation, and marketing services.
Drivers Of Organic Growth
Substantial demand potential from mobile operators to progress their 5G network upgrades.
With unique Flat and Parabolic Antennas, alongside a Dual Band solution, MTI is ideally placed to benefit significantly as a leading supplier of 5G backhaul antennas.
Its military products include a range of broadband, tactical and specialised communications antennas, antenna systems and direction-finding arrays installed on airborne, ground and naval, including submarine and platforms around the world.
Global water usage is outpacing the growth in the world’s population, at the same time as the impacts of climate change are making fresh water supply even less predictable and reliable.
Therefore, demand for water management systems is rapidly increasing.
Increased defence budget spending. Israel is a natural incubator for new defence technologies and MTI has significant defence connections.
MTI also has a strong presence in India, which MTI’s customers are using to conform to India’s Defence Offset Guidelines which dictate, in general, that 30% of any defence contract must be completed in India.
Management Outlook
On Wednesday 21st August when announcing the group’s latest Interim Results to end-June, CEO Moni Borovitz stated that:
"Demand for good communication utilising radio frequency solutions across the water, defence and 5G industries remains high.
Our range of products are well positioned in each of these industries and we are experiencing strong enquiry levels, most notably in the defence sector.
Our trading performance in H1 shows a good increase in profitability and strong cash generation, combined with maintaining our firm financial base.
We are therefore well placed for the current year.
Not surprisingly, the conflict in Israel is having some impact on local market revenues although we did experience better deal flow in July and hopefully we will see the end to this conflict soon."
Yesterday following further 5G contract win news from India for one of its leading cellular service providers, Moni Borovitz commented:
"Last year we extended our presence in India to accommodate further demand for our 5G backhaul antenna solution.
This win vindicates that decision and, subject to the timely fulfilment of the first stage, should grow to become the first really significant 5G project for MTI in India.
It remains hard to predict the timing of 5G projects, but the potential for significant orders in the future is clear and MTI is ideally placed to continue to secure them."
The Equity
There are some 88.54m shares in issue.
The Borovitz family are the largest holders with 31.8% of the equity, the Beer family own 10.4%, Directors etc own 6.3%, Premier Miton has 4.9% and Herald Investment Management holds 5.1%, and Canaccord Genuity Wealth has a 2.16% stake.
Analyst View
Analyst Rob Sanders at Shore Capital Markets is obviously very keen on this group’s shares.
He currently has a DCF analysis ‘fair value’ of 80p on its shares, some 60% higher than the market price.
For the year to end-December he estimates that revenues will increase to $48.2m ($45.6m), lifting adjusted pre-tax profits to $4.9m ($4.8m), with earnings of 4.5c (4.6c), but with an increased dividend of 3.3c (3.1c) per share.
For the coming two years his figures suggest sales rising to $51.5m then to $55.0m for 2025 and 2026, lifting profits to £5.2m then $5.6m, earnings to 4.7c then 4.9c, while raising dividend to 3.4c and 3.6c respectively.
In My View
We will be getting an Update in November when the group issues it Q3 results, in the meantime the shares at 49.50p, valuing the group at only £43m, look to offer some really attractive technology-based upside.
I now set a Target Price of 62p on its shares.
(Profile 25.09.24 @ 49.50p set a Target Price of 62p)
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