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Mteto Buffalo, CEO of Altron
Fresh from Successful listing of its former UK subsidiary, Bytes Technology Group, could Altron consider a separation from Netstar next as it seeks to unlock more shareholder value?
Bytes was listed on the main board of the London Stock Exchange on Thursday with a secondary listing on the JSE. Altron said that more than R7 billion in shareholder value was realized through the Bytes spin-off.
Now, with Altron confirming in a statement that it is considering additional options to unlock shareholder value, the attention of its board and management team may turn to Netstar, its vehicle tracking and recovery business, whose competitors, including Cartrack and Mix Telematics, are worth more than the entire Altron group.
This is by no means a scientific exercise, but Altron’s market capitalization after the Bytes spin-off is less than the market values of Cartrack and Mix Telematics, despite having similar earnings profiles:
- For the year ended February 29, 2020, Netstar reported income of R1.54 billion and earnings before interest, taxes, depreciation and amortization (Ebitda) of R611 million. It had 833,000 subscribers.
- For the year ended March 31, 2020, rival Mix telematics it had 818,000 subscribers. Revenue was US $ 145.65 million (R2.14 billion at the time of writing) and Ebitda was $ 41.73 million (R613.6 million), almost exactly the same as Netstar’s Ebitda. . Mix Telematics’ market capitalization, at the time of this writing, was 4.1 billion rand.
- Cartrack, which had 1.13 million subscribers as of February 29, 2020, generated annual revenue of R1.94 billion and an Ebitda of R969 million. Its market capitalization, at the time of writing, was R13 billion.
Although Altron CEO Mteto Nyati will not specifically comment on Netstar as a value unlock opportunity, he said it is “very interesting” that Bytes, now that it has been listed separately, has a significantly higher market value. higher than Altron’s, but producing roughly one-third of the Altron group’s profits.
Part of this discrepancy could be attributed to country risk (South Africa is considered a higher investment risk than the UK), but it is also due to a discount that investors give to groups like Altron, as opposed to companies with a more focused focus. limited, Nyati said. .
Image: Netstar
“For Bytes UK, we look at the sum of the parts. We analyze comparable (entities) in other parts of that market. So we clearly saw that it was very underrated, ”Nyati said. “The board will do a similar exercise to see if there is a possibility of doing something (more similar). As management, it is our responsibility, with the board… if we find something similar… act ”.
With an Altron “capital markets day” in early February, perhaps an announcement about Netstar, or other value-unlocking opportunities, is not too far off.
In an interview with TechCentral on Thursday, Nyati described what remains after the Bytes spin-off as “Altron 2.0”. He said there is “a lot of synergy” in the group and dismissed a suggestion that a complete breakdown of Altron’s various assets would make sense.
“You would expect the investment community to see the value. If not, we will have to look for other options, ”he said. “Our priority right now is to demonstrate the true value of what remains.” – (c) 2020 NewsCentral Media
