Trakm8 Holdings Net Income surged on 98.0% in 2016 and EBITDA Margin increased slightly on 1.8 pp from 14.0% to 15.8%

04 Jul 2016 • About Trakm8 Holdings ($TRAK) • By InTwits

Trakm8 Holdings reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:

Trakm8 Holdings is a fast growth stock: FY2016 revenue growth was 43.7%, 5 year revenue CAGR was 43.7% at FY2016 ROIC 20.8%
EBITDA Margin is expanding: 15.8% in FY2016 vs. 14.0% in FY2015 vs. 7.1% in FY2012
EBITDA Margin is quite volatile: 15.8% in FY2016, 14.0% in FY2015, 12.9% in FY2014, 6.8% in FY2013, 7.1% in FY2012
Trakm8 Holdings has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.2%. At the same time it's a lot of higher than industry average of 2.1%.
CAPEX is quite volatile: 0.45 in FY2016, 0.36 in FY2015, 0.30 in FY2014, 0.098 in FY2013, 0.091 in FY2012
The company has highly profitable business model: ROIC is at 20.8%

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Trakm8 Holdings ($TRAK) key annual financial indicators

mln. £	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	5.216	4.750	9.193	17.853	25.649	43.7%
Gross Profit	3.326	3.417	5.261	8.062	12.398	53.8%
SG&A		3.378	4.399	6.301	7.868	24.9%
EBITDA	0.371	0.324	1.184	2.498	4.044	61.9%
Net Income	0.135	0.150	0.471	1.689	3.344	98.0%
Balance Sheet
Cash	1.087	1.405	2.911	3.408	3.871	13.6%
Short Term Debt	0.060	0.047	0.500	0.576	0.981	70.4%
Long Term Debt	0.163	0.116	1.792	2.236	3.976	77.8%
Cash flow
Capex	0.091	0.098	0.303	0.355	0.449	26.6%
Ratios
Revenue growth	24.6%	-8.9%	93.5%	94.2%	43.7%
EBITDA growth	-37.1%	-12.7%	265.8%	111.0%	61.9%
Gross Margin	63.8%	71.9%	57.2%	45.2%	48.3%	3.2%
EBITDA Margin	7.1%	6.8%	12.9%	14.0%	15.8%	1.8%
Net Income Margin	2.6%	3.2%	5.1%	9.5%	13.0%	3.6%
SG&A, % of revenue		71.1%	47.8%	35.3%	30.7%	-4.6%
CAPEX, % of revenue	1.7%	2.1%	3.3%	2.0%	1.8%	-0.2%
ROIC	3.8%	1.9%	18.7%	22.5%	20.8%	-1.7%
ROE	5.8%	6.1%	12.3%	27.9%	27.8%	-0.1%
Net Debt/EBITDA	-2.3x	-3.8x	-0.5x	-0.2x	0.3x	0.5x

Revenue and profitability

Trakm8 Holdings's Revenue jumped on 43.7% in FY2016. Despite revenue decline the EBITDA margin expanded. EBITDA Margin surged on 23.7 pp from -18.7% to 5.0% in FY2016.

Gross Margin increased on 3.2 pp from 45.2% to 48.3% in FY2016. SG&A as a % of Revenue decreased on 4.6 pp from 35.3% to 30.7% in FY2016.

Net Income marign increased on 3.6 pp from 9.5% to 13.0% in FY2016.

Capital expenditures (CAPEX) and working capital investments

In FY2016 the company had CAPEX/Revenue of 1.8%. The company's CAPEX/Revenue showed almost no change from FY2013 to FY2016. It's average CAPEX/Revenue for the last three years was 2.3%.

Return on investment

The company operates at high and attractive ROIC (20.79%) and ROE (27.78%). ROIC decreased slightly on 1.7 pp from 22.5% to 20.8% in FY2016. ROE showed almost no change in FY2016.

Leverage (Debt)

Company's Net Debt / EBITDA is 0.3x and Debt / EBITDA is 1.2x. Net Debt / EBITDA surged on 0.5x from -0.2x to 0.3x in FY2016. Debt jumped on 76.3% in FY2016 while cash jumped on 13.6% in FY2016.

Valuation

Trakm8 Holdings's trades at EV/EBITDA 22.5x and P/E 26.9x while industy averages are 15.6x and 19.1x. The company's EV/(EBITDA-CAPEX) is 25.3x with the industry average at 19.0x.

Appendix 1: 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	FY2012	FY2013	FY2014	FY2015	FY2016
Mti Wireless Edge ($MWE)	-13.5%	5.6%	6.8%	36.5%
Concurrent Technologies ($CNC)	-7.3%	-7.3%	8.0%	33.3%
Toumaz Ld ($TMZ)	279.7%	150.3%	19.5%	22.1%
Seeing Machines ($SEE)	0.1%	66.3%	43.3%	13.3%
Telefonaktiebolaget Lm Ericsson ($0O87)	0.4%	-0.2%	0.3%	8.3%
Median (19 companies)	0.2%	3.4%	0.3%	0.2%	4.7%
Trakm8 Holdings ($TRAK)		-8.9%	93.5%	94.2%	43.7%

Top companies by Gross margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Cml Microsystems ($CML)	69.3%	70.3%	73.3%	70.9%	71.2%
Concurrent Technologies ($CNC)	51.7%	50.6%	51.2%	50.6%
Vislink ($VLK)	39.4%	40.7%	45.9%	45.0%
Seeing Machines ($SEE)	61.4%	64.1%	59.8%	44.9%
Toumaz Ld ($TMZ)	45.6%	44.4%	43.6%	42.4%
Median (18 companies)	33.2%	34.1%	36.0%	36.6%	71.2%
Trakm8 Holdings ($TRAK)	63.8%	71.9%	57.2%	45.2%	48.3%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Cml Microsystems ($CML)	28.7%	33.1%	35.1%	29.9%	30.0%
Concurrent Technologies ($CNC)	29.3%	23.3%	27.1%	28.6%
Pure Wafer ($PUR)	16.3%	17.0%	31.5%	27.4%
Samsung Electronics Co ($SMSN)	22.2%	23.3%	20.9%	23.6%
Telefonaktiebolaget Lm Ericsson ($0O87)	13.9%	12.4%	11.8%	13.0%
Median (19 companies)	3.8%	8.0%	5.6%	5.3%	30.0%
Trakm8 Holdings ($TRAK)	7.1%	6.8%	12.9%	14.0%	15.8%

Top companies by CAPEX/Revenue, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Samsung Electronics Co ($SMSN)	11.4%	10.1%	10.7%	12.9%
Pure Wafer ($PUR)	0.5%	3.5%	23.3%	8.5%
Tatung Co ($TAT)	6.1%	4.3%	4.3%	6.7%
Sunplus Technology Co Ltd ($SUPD)	4.8%	6.3%	15.0%	4.5%
Seeing Machines ($SEE)	0.3%	2.2%	1.0%	3.9%
Median (19 companies)	2.2%	2.0%	1.9%	1.8%	1.9%
Trakm8 Holdings ($TRAK)	1.7%	2.1%	3.3%	2.0%	1.8%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Concurrent Technologies ($CNC)	14.6%	8.2%	14.1%	20.9%
Samsung Electronics Co ($SMSN)	22.4%	24.0%	14.4%	14.0%
Telefonaktiebolaget Lm Ericsson ($0O87)	13.7%	11.1%	10.3%	13.5%
Hon Hai Precision Industry ($HHPD)	9.9%	8.7%	10.3%	11.7%
Cml Microsystems ($CML)	17.4%	26.1%	23.0%	10.3%	10.1%
Median (19 companies)	0.6%	6.0%	5.7%	3.4%	10.1%
Trakm8 Holdings ($TRAK)	3.8%	1.9%	18.7%	22.5%	20.8%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Tatung Co ($TAT)	41.1x	6.1x	6.7x	40.1x
Vislink ($VLK)	-1.2x	-0.5x	-0.0x	1.8x
Mti Wireless Edge ($MWE)	-21.9x	1.9x	-1.6x	0.2x
Telefonaktiebolaget Lm Ericsson ($0O87)	-0.1x	0.0x	-0.2x	0.1x
Samsung Electronics Co ($SMSN)	-0.1x	-0.1x	-0.1x	-0.2x
Median (15 companies)	-0.8x	-0.5x	-1.4x	-1.4x	-2.0x
Trakm8 Holdings ($TRAK)	-2.3x	-3.8x	-0.5x	-0.2x	0.3x

Trakm8 Holdings stock price chart

Trakm8 Holdings financials

mln.	FY2010	FY2011	FY2012

Revenue	3.426	4.186	5.216
EBITDA	0.556	0.589	0.371
Net income	0.561	0.206	0.135
CAPEX	0.007	0.050	0.091
Debt	0.240	0.193	0.223
Cash	0.692	1.119	1.087

About Trakm8 Holdings

Trakm8 Holdings PLC designs, develops, manufactures, and markets telematics hardware and software solutions worldwide. It operates in four segments: Products, Solutions, Engineering Services, and Manufacturing Services. The company offers Trakm8 Swift, a fleet management solution with reports, such as vehicle timesheet reports, route replays, and graphical vehicle utilization charts, as well as vehicle visibility and aerial photography; Trakm8 ecoN, which generates real time feedback for the drivers; and Trakm8 Secure, a solution to prevent the misuse of plant and equipment, deter theft, and aid recovery if stolen. It also provides Trakm8 Tacho, a Web based automated tachograph analysis system for various type of tachograph; Trakm8 logistics, a customer service tool enabling real time visibility of daily jobs or deliveries against a plan; and Trakm8 Insure solution. In addition, the company offers telematics, vehicle connectivity, radio frequency identification, and configuration manager products, as well as accessories; engineering services, including bespoke engineering, professional services, and mapping solutions; and sub contract electronic manufacturing services to various clients. Its solutions are used in various applications from heavy duty commercial vehicles to light CVs, cars, earth moving equipment, and a range of niche applications, such a golf carts and industrial cleaning machines. The company was founded in 2002 and is headquartered in Shaftesbury, the United Kingdom.