Smarteq is a very good choice in the “Expectation Category"
Klicka här för att läsa artikeln som PDF-fil (på svenska + se nedan)No clear "buy-signal" for Smarteq. The antenna company Smarteq was greatly affected by the down turn in the automotive business last year. However, looking ahead it´s not unfeasible that the company soon will be harvesting.
Smarteq is listed on First North of the Stockholm Stock Exchange with a total stock value of 65 MSEK. The company was founded in 1996 and has through acquisitions built a business in antennas and antenna technology. The company turnover is approximately 100 MSEK. After years of delivering negative results the company finally made a small profit in 2007. Mainly due to the fact that the company had managed to establish it self in two growth niches; antennas to automated electrical meter readings and antennas to premium cars and trucks.
According to Swedish legislation and EU directives all electrical meters in Sweden should be automated by end of June 2009. The implementation has been a gigantic project running for the past few years. The market has attracted a lot of different companies, but far from all has been successful. For example Senea struggled and never made a success, and Metrima, fully owned by Ledstierna, is another company who is also suffering from losses made.
Smarteq has sold antennas to power companies that have chosen to collect the meter reading information via the mobile communication net. Approximately 40% of all electrical meters in Sweden use this technique and Smarteq has delivered almost all antennas. The company is a sub supplier to for example Telenor and Landis+Gyr who is handling the installations themselves. Smarteq has around 30 employees who is focussing on sales and R&D. The production is outsourced to suppliers in China.
The Swedish market for antennas to automated meter readings is limited. It is estimated that it is worth around 65 MSEK assuming an antenna price of approximately 25-40 SEK per piece. However, this technique is spreading to other markets like the other Nordic countries followed by the Netherlands and France. Smarteq was the only antenna company exhibiting at three big Exhibitions dedicated to automated meter readings last year, says Lars Ericson CEO at Smarteq. Now it remains to be seen if the company can repeat its success outside Sweden.
A big order from Volvo
The second successful niche is developing antennas to premium cars and trucks. These antennas are mostly built-in ones, fitted in the windscreen or chassis for aesthetical reasons. Furthermore, the company has also developed antennas to customers with advanced communication needs like trucks that need a communication radio, GPS, wireless road toll readings and diagnostics. However, last autumn the down turn in the automotive business greatly affected the company. During the third quarter sales went down 40 percent to 17 MSEK. Operating profit only dropped to minus 0,3 MSEK (+ 0,9 MSEK), mainly thanks to lower production cost at newly contracted Chinese suppliers. In total Smarteq has a turnover of 100 MSEK with an operating profit of 2,9 MSEK during the last 12 months. If you add the deduction for Goodwill the operating profit would have been 5,4 MSEK. Last autumn it was also clear that Volvo has chosen to go with an antenna platform from Smarteq to their future trucks. This could be very big according to Smarteq; it may even double the turnover for the company, which means that the agreement may be worth around 100 MSEK per year. Although, the big deliveries lay a couple of years ahead. In other words it is not at all unfeasible that Smarteq soon will be harvesting. The potential is there and Smarteq has proven that the company can deliver large quantities of antennas. The downside is that the company is small and therefore vulnerable. The company´s finances could for example be stronger. The net deficit is 13 MSEK, but the strong main owners Christer Eriksson and Sten K Johnson could back the company. The total value of the company is not too low compared to how Smarteq stands. The total stock value plus net deficit is 78 MSEK, which is 14 times the latest 12 months operating profit and 0,8 times the turnover. However, buyers are of course looking ahead towards 2010 when new deliveries to Volvo and power meters abroad will commence. Smarteq is a very good choice in the “Expectation Category", though 2009 is a middle year for the company. We therefore refrain from a “buy advice" but keep a close eye on the company´s future share price. Daniel Svensson/Börsveckan
Automotive