Pointer Telocation — NASDAQ:PNTR

About Pointer Telocation

Pointer Telocation Ltd. engages in mobile resource management products and services. It operates through the following segments: Mobile Resource Management (MRM), Roadside Assistance Services, and Cellocator.

The MRM segment offers asset tracking services, fleet management services, and stolen vehicle retrieval services.

he Roadside Assistance Services segment include services such as towing, temporary vehicle replacement services, mobile automobile repair, as well as vehicle body work and replacement parts installation services.

The Cellocator segment designs, develops and produces market leading customizable MRM products that utilize various Radio Frequency and Cellular communication technologies. The company was founded on July 17, 1991 and is headquartered in Rosh HaAyin, Israel.

$9.55
Entry Price
$18.88
Share Price
+98%
Trade Return
450
Trade age — days

Overview

Pointer is a Truck fleet performance company (IoT) operating a SaaS business model. Each fleet inventory pays per month with revenue approximately $US75 / month. Their fleet tracking help save fleet fuel costs, insurance costs and improve road safety. In particular, the increase in safety makes it attractive for insurance companies to reduce premiums if the fleet is using Pointer devices.

The previously had a roadside assistance service, which has been sold off in 2016 so the company can focus entirely on the mobile resource management business.

From the company:

The operating leverage inherent to our SAAS business model allows us to strongly benefit from the growth in the subscriber base, as was demonstrated by the solid improvement in our operating margin in the quarter

Pointer is very well positioned, with the right solutions in place, to capitalize on this increased interest globally

Since the penetration rate is very low, I think that we are still far away from the inflection point.

Growth Drivers

  • Continued growth in existing markets (penetration rate is low)
  • Just starting to enter US market, so huge market potential in the coming years
  • Taxi companies (old and new) - although not current focus (Recent contract for 4,000 for-hire taxicab vehicles in New York)
  • Increased margins as technology continues to improve

Risks

  • Small cap company, so expect price volatility.
  • Israeli company which is were the majority of customers currently reside, so there is currency exchange rate risk.

Valuation Metrics

Earnings are consistently growing on a quarterly basis thanks to the SaaS model based on number of subscribers. As numbers increase, so does margin due to increased efficiencies.

We forecast forward EPS of $1.16 (based on 30% growth on last FY). Earnings for last quarter were up 48% YoY.

This places the company on a forward PE is 8.2, but given the growth of earnings, think 30 is a better measure for the company.

This provides a valuation of $34.80 (+264%) on the current price

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