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MTI Wireless Edge - Expanding irrigation opportunity

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.

Executive summary

The MTI share price has increased 53% from its low point of January 2019. However, the shares remain on a price/earnings ratio of only 8.6x for 2019e and 7.0x for 2020e. With structural growth drivers across all three divisions and a strong balance sheet, we would argue for a P/E of at least 10x for 2020e. As the market continues to become more familiar with the enlarged MTI Wireless Edge (following the August 2018 merger) we see scope for further re-rating.

Quick facts: MTI Wireless Edge Limited

Price: 36.5 GBX

AIM:MWE
Market: AIM
Market Cap: £32.08 m
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Financial results and forecasts
Growth drivers
Management
Market conditions
Milestones & inflection points

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