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Trakm8 Hldgs reports 32.6% EBITDA growth and 1.6 pp EBITDA Margin growth from 8.7% to 10.2%

02 Jul 2018 • About Trakm8 Holdings ($TRAK) • By InTwits

Trakm8 Holdings reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
  • Trakm8 Holdings is a fast growth stock: FY2018 revenue growth was 12.4%, 5 year revenue CAGR was 44.7% at FY2018 ROIC 4.6%
  • Trakm8 Holdings has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.6%. At the same time it's in pair with industry average of 3.3%
  • CAPEX is quite volatile: £0m in FY2018, £0m in FY2017, £0m in FY2016, £0m in FY2015, £0m in FY2014
  • The company has potentially unprofitable business model: ROIC is 4.6%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

Trakm8 Holdings's Revenue surged on 12.4%. Revenue decline was accelerating on average at -25.2 pp per annum in FY2014-FY2018. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased slightly on 1.6 pp from 8.7% to 10.2% in FY2018.

Gross Margin showed almost no change in FY2018. SG&A as a % of Revenue showed almost no change in FY2018. During FY2014-FY2018 SG&A as a % of Revenue bottomed in FY2016 at 30.7% and was growing since that time.

Net Income margin showed almost no change in FY2018. During the last 5 years Net Income margin topped in FY2016 at 13.0% and was declining since that time.

Investments (CAPEX, working capital and M&A)

In FY2018 the company had CAPEX/Revenue of 0.30%. The company's CAPEX/Revenue decreased slightly on 1.7 pp from 2.0% in FY2015 to 0.30% in FY2018. It's average CAPEX/Revenue for the last three years was 0.91%. CAPEX as a % of Revenue stuck to a declining trend at -0.73 pp per annum in the last 5 years.

Return on investment

The company operates at low ROIC (4.6%) and ROE (7.4%). ROIC increased slightly on 1.00 pp from 3.6% to 4.6% in FY2018. ROE showed almost no change in FY2018. During FY2014-FY2018 ROE topped in FY2015 at 27.9% and was declining since that time.

Leverage (Debt)

Company's Net Debt / EBITDA is 1.1x and Debt / EBITDA is 2.2x. Net Debt / EBITDA dropped on 0.6x from 1.7x to 1.1x in FY2018. Debt surged on 15.6% while cash surged on 74.5%. Net Debt/EBITDA grew at 0.5x per annum in the last 5 years.

Trakm8 Holdings has no short term refinancing risk: cash is higher than short term debt (301.7%).

Valuation and dividends

Trakm8 Holdings's trades at EV/EBITDA 12.3x and P/E 22.0x.

Financial and operational results

FY ended 31 Mar 2018

Trakm8 Holdings ($TRAK) key annual financial indicators

mln. £201420152016201720182018/2017
Gross Profit5.2618.06212.39813.20914.84912.4%
Net Income0.4711.6893.3441.4701.5716.8%
Balance Sheet
Short Term Debt0.5000.5760.9811.0511.1519.5%
Long Term Debt1.7922.2363.9764.8065.62117.0%
Cash flow
Revenue growth93.5%94.2%43.7%4.3%12.4%
EBITDA growth265.8%111.0%61.9%-42.7%32.6%

Gross Margin57.2%45.2%48.3%49.4%49.4%-0.0%
EBITDA Margin12.9%14.0%15.8%8.7%10.2%1.6%
SG&A, % of revenue47.8%35.3%30.7%46.6%46.8%0.3%
Net Income Margin5.1%9.5%13.0%5.5%5.2%-0.3%
CAPEX, % of revenue3.3%2.0%1.8%0.7%0.3%-0.4%

Net Debt/EBITDA-0.5x-0.2x0.3x1.7x1.1x-0.6x

Peers in Technology Hardware & Equipment

Below we provide Trakm8 Holdings benchmarking against other companies in Technology Hardware & Equipment industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Filtronic ($FTC)-17.7%-46.7%-22.5%160.5%
Toumaz Ld ($TMZ)19.5%22.1%0.3%27.7%
Cml Microsystems ($CML)-10.6%4.7%21.5%14.2%
Samsung Electronics Co ($SMSN)-9.8%-2.7%0.6%18.7%
Batm Advanced Communications ($BVC)-4.3%-11.1%-6.9%18.5%
Median (18 companies)3.4%0.2%-4.7%0.4%14.2%
Trakm8 Holdings ($TRAK)94.2%43.7%4.3%12.4%

Top companies by Gross margin, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Cml Microsystems ($CML)73.3%70.9%71.2%71.4%70.2%
Vislink ($VLK)45.9%45.0%73.1%62.9%
Concurrent Technologies ($CNC)51.2%50.6%54.2%55.4%
Samsung Electronics Co ($SMSN)37.8%38.5%40.4%46.0%
Toumaz Ld ($TMZ)43.6%42.4%44.0%41.2%
Median (17 companies)36.0%36.6%31.4%22.1%70.2%
Trakm8 Holdings ($TRAK)57.2%45.2%48.3%49.4%49.4%

Top companies by EBITDA margin, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Samsung Electronics Co ($SMSN)20.9%23.6%24.7%31.6%
Cml Microsystems ($CML)35.1%29.9%30.0%31.4%30.7%
Concurrent Technologies ($CNC)27.1%28.6%24.8%28.4%
Tatung Co ($TAT)9.2%2.1%9.1%12.5%
Mti Wireless Edge ($MWE)5.5%12.0%9.1%8.5%
Median (18 companies)5.6%5.3%6.1%5.4%30.7%
Trakm8 Holdings ($TRAK)12.9%14.0%15.8%8.7%10.2%

Top companies by CAPEX/Revenue, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Tatung Co ($TAT)4.3%6.7%16.1%45.1%
Samsung Electronics Co ($SMSN)10.7%12.9%12.0%17.9%
Seeing Machines ($SEE)1.0%3.9%1.6%5.6%
Batm Advanced Communications ($BVC)1.6%2.5%4.1%3.0%
Filtronic ($FTC)3.2%1.1%1.3%2.3%
Median (18 companies)1.9%1.8%1.5%1.7%1.5%
Trakm8 Holdings ($TRAK)3.3%2.0%1.8%0.7%0.3%

Top companies by ROIC, %

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Samsung Electronics Co ($SMSN)14.4%14.0%14.3%23.2%
Filtronic ($FTC)-14.9%-80.4%-79.3%18.6%
Concurrent Technologies ($CNC)14.1%20.9%14.7%16.1%
Cml Microsystems ($CML)23.0%10.3%10.1%11.2%10.4%
Lite-On Technology Corp ($LTTD)5.7%7.0%10.6%7.5%
Median (18 companies)5.7%3.4%1.7%5.1%10.4%
Trakm8 Holdings ($TRAK)18.7%22.5%20.8%3.6%4.6%

Top companies by Net Debt / EBITDA

Top 5 FY2014 FY2015 FY2016 FY2017 FY2018
Vislink ($VLK)-0.0x1.8x0.4x54.5x
Tatung Co ($TAT)6.7x40.1x9.2x7.7x
Compal Electronics Inc ($CEIR)-0.2x-0.3x0.1x1.0x
Global Invacom Group Ltd ($GINV)-2.8x-1.4x-0.9x0.1x
Hon Hai Precision Industry ($HHPD)-1.2x-1.5x-0.9x0.1x
Median (15 companies)-1.4x-1.4x-0.9x-1.1x-1.4x
Trakm8 Holdings ($TRAK)-0.5x-0.2x0.3x1.7x1.1x