Enjoy this free share recommendation on MTI Wireless Edge extracted from the latest edition of the premium Trendwatch newsletter…
NEXT A great little AIM company… except that MTI Wireless Edge is very small, capitalised at only £13.9m. Small companies are inherently risky.
What does it do? You want the short answer or the long answer?
OK, here’s the short answer: it designs, develops, manufactures and supplies antennas.
Now the long answer:
Founded in 1972 in Israel, MTI Wireless Edge describes itself as “a world leader in the development and production of high quality, cost-effective antenna solutions for both civil and military markets”.
Its antenna solutions include smart antennas, multiple input multiple output (MIMO) antennas and dual polarity for wireless applications, such as worldwide interoperability for microwave access (WiMAX), wireless fidelity (WiFi) and broadband wireless access.
It produces antennas ranging in frequency from 100 kilohertz to 90 gigahertz, for both military and commercial applications. It also offers wireless networking antennas and radio frequency identification (RFID) antennas. Its RFID antennas include ultra high frequency (UHF) near-field antenna.
Its military products include a range of broadband, tactical and specialized communications antennas, antenna systems and direction finding (DF) arrays installed on airborne, ground and naval, including submarine and platforms around the world.
Don’t ask us to explain all that in detail. Suffice it to say that things have moved on a long way from the bent coat-hanger attached to your tranny.
Today’s antennas need to be highly discriminating, picking up only the frequencies the equipment requires – even when there are multiple radios within the same device, all operating on different frequency bands.
Think of your smartphone. It has a stack of radio transmitters and receivers within its svelte dimensions, each requiring an antenna capable of receiving and/or transmitting These radios include:
•The primary cellular radio that handles your phone calls and text messages. This radio has to handle a multitude of 2G/3G/4G signals, including GSM (2G); UMTS (3G); and LTE (4G), all of which transmit and receive on a number of frequency bands, depending on the country.
•The diversity antenna. This ’listens’ to the incoming cellular signals in the vicinity of the phone so that it can switch your smartphone’s tuning to the signal with the strongest energy.
•The GPS antenna, to pick up the signals from multiple GPS satellites to drive your navigation apps.
•The wifi antenna, to enable your phone to connect to your home network, or to wifi hotspots.
•The Bluetooth antenna, to connect you across short ranges such as to headphones or hands-free equipment.
•The Near-Field Communications (NF) antenna, to enable you to pay for your coffee or newspaper just by bringing your phone close to a retail terminal.
hat’s just to give you a tiny flavour of the requirements of just one type of device. Now imagine all the tens of thousands of other devices out there, civilian and military, that need to transmit or receive radio signals, and you start to get some idea of the scale of MTI’s market.
That said, the company has another string to its bow. It develops water irrigation solutions. And that’s where much of the interest in the company lies. More about that in a moment. Here’s the track record (below). As you can see, it’s a bit of a slow burner; possibly a share to tuck away and forget ab out.
| Year | 2012 | 2013 | 2014 | 2015 | 2016 |
|---|---|---|---|---|---|
| Revenue ($m) | 12.7 | 13.4 | 14.3 | 19.6 | 23.3 |
| Pre-tax Profit ($m) | (0.37) | 0.39 | 0.25 | 1.22 | 0.94 |
| Earnings Per Share (c) | 0.7 | 0.8 | 0.5 | 2.4 | 1.8 |
| Dividends Per Share (c) | 0.6 | 0.7 | 0.7 | 1.1 | 1.0 |
When you look at the forecasts (below), it isn’t immediately apparent, but this is actually quite a fast growing company, with eps forecast to grow by 63% in 2017 and 17% in 2018.
Furthermore, MTI Wireless Edge is not expensive, being on a p/e of 11.7 this year and a nice low PEG of 0.68. And it has quite a strong balance sheet, with no net debt.
| Year | 2017 | 2018 |
|---|---|---|
| Revenue ($m) | 25.8 | 27.8 |
| Pre-Tax Profit ($m) | 1.56 | 1.80 |
| Earnings Per Share (c) | 2.9 | 3.4 |
| Dividends Per Share (c) | 1.1 | - |
The last set of results we’ve seen were those issued in May, covering the first quarter of the year. It said: We continue to see good demand in all areas (military, RFID and broadband access) and given the current order book and pipeline of opportunities in the antenna segment, we have a strong belief that the growth will continue in 2017 and beyond. So that’s encouraging.
But a possibly more interesting announcement came the following month. Its wholly owned subsidiary, Mottech Water Solutions Ltd has agreed to establish a joint venture company called Mottech China with Omega Technologies, which is an existing third-party sales representative for Mottech’s water irrigation solutions in China. Mottech China will be 60% owned by MTI.
