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MTI Wireless Edge (LON:MWE) - Post-merger, all on track

MTI Wireless Edge (LON:MWE) - Post-merger, all on track

During the last week, the company has made two significant announcements:

  • The nomination of Moni Borovitz as CEO, from finance director previously, subject to the annual general meeting on 14 March.
  • A share buyback of up to £150k, commencing 28 January

The company came into being in its current form via the August 2018 merger of MTI Wireless Edge with MTI Computers, with Moni Borovitz playing a leading role in delivering the merger.

In this report, we present a reminder of the key dynamics of the merger. We note that since the merger, the share price has yet to stabilise and we believe that the buyback may be helpful in this regard.

There has been no change in the company's trading outlook since our last report in October, and we continue to forecast revenue growth across all four business areas, driving +26% earnings per share (EPS) growth for 2019e.

In the antennas business, in particular, we are encouraged by recent news on the 5G wireless space. Nokia and Telefonica have rolled out new 5G tests in Berlin, which we understand will include MTI antennas. We believe that 5G wireless offers a potential growth "kicker" for MTI in the next few years.

Full report is available via Capital Network website
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MTI Wireless Timeline

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MTI Wireless Edge (LON:MWE) reported results on 11 March for the full year to 31 December 2018. The results show continued strong progress following the August 2018 merger of MTI Wireless Edge with MTI Computers. Revenues increased by 35%, or 2% organically, operating profit +21% organically, and earnings per share (EPS) +14%. The statement also highlights a healthy order backlog and pipeline of opportunities going into 2019.

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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.

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.

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