Quartix Technologies PLC (LON: QTX)  

Quartix Technologies PLC (LON: QTX) is an FTSE AIM All-Share index listed Company that is the leading supplier of subscription-based vehicle tracking systems, software, and services. Moreover, the Company facilitates fleet customers & insurers to enhance productivity and reduce cost by capturing, analysing, and reporting vehicle & driver data. QTX has installed more than 600,000 systems since 2001.

On 01 March 2022, the Company will release full-year FY21 results.

Recent Trend of Dividend payments: The Company had paid an interim dividend of 1.5 pence per share on 10 September 2021, with an ex-dividend date of 12 August 2021.

(Data Source: LSE Website, Research done by Kalkine Group)

Growth Prospects

• CEO Succession: QTX had appointed Richard Lilwall as the Chief Executive Officer. Moreover, Mr Lilwall is very passionate about the potential in the telematics market and joined the Company in early October 2021.
• Expansion in France: The Company has impressive new unit installations in France, due to the expansion of direct sales force. Moreover, the Company has proved that investment in France was successful. Therefore, the Company intends to further expand in southern France by the mid of 2022.
• Accelerated Investments: The Company has made investments during the year 2021 to create a subscription platform, and increased subscription base growth. Moreover, the Company intends to make additional investments in 2022 by establishing serviced regional sales offices implementing data-driven optimization and automation to drive its European growth.

Key Risks

• Record UK Inflation: British Consumer Price inflation surged to 5.4% in December 2021, putting pressure on the Bank of England to raise interest rates again.
• Cyber Crimes: The increasing number of cyber-attacks across several industries has posed serious threats, and the technology industry has tried to combat these attacks.
• Workforce Shortage: The shortage looming for the information security workforce would lead to the other emerging risks in the sector.
• Other Principal Risks: The cancellation of obtained contracts, lack of funding availability, supply chain disruption amid the Covid-19 pandemic can impact the growth trajectory.

Now, we will analyse the Key Fundamental Statistics & Shareholding Pattern of Quartix Technologies PLC.

Walters (Andrew John) is the most significant shareholder as it holds nearly 10.66 million shares as of 31 December 2021.   

Post-Close FY21 Trading Update (for 12 months ended 31 December 2021, as of 10 January 2022)

(Source: Company’s Website)

• Impressive Fleet Business: The Company had achieved a 17% increase in the annual vehicle subscription base to 202,734 units and the annualised subscription base value increased by £2.0 million to £23.9 million during FY21. Also, fleet revenue growth has gone up by 8% in FY21 as compared to 6% in FY20.
• Positive Forecasts: The Company expects revenue and free cash flow of £25.6 million and £3.8 million, respectively, during FY21.
• Strong Cash Position: QTX’s estimated cash balance for the year ended December 2021 was £5.6 million. The cash balance as on 30 June 2021 was £4.3 million, thereby making the Company more cash-rich.
  

Financial Ratios (H1 FY21)

Share Price Performance Analysis

 (Source: Refinitiv; Analysis done by Kalkine Group)

On 20 January 2022, at 12:27 PM GMT, QTX’s shares were trading at GBX 385.00, down by around 2.53% from the previous day closing price. Stock 52-week High and Low were GBX 580.00 and GBX 330.00, respectively.

From a technical perspective, the stock price is hovering between the lower Bollinger band and the middle Bollinger band, indicating an upside potential in the stock price. Meanwhile, the 14-days RSI stood at ~41.09 levels. 

Valuation Methodology: Price/Earnings Approach (FY21) (Illustrative)

Business Outlook

QTX has performed well in terms of revenue, free cash flow, and progress in fleet business despite of lockdown and various pandemic restrictions. Moreover, the Company had estimated insurance revenue to represent just 4% of the total revenue in 2022 due to the continued shift from low margin business to telematics market. It has shown growth during the year 2021 in each region, especially in Spain, Italy, Germany, and Poland. In addition, the Company is planning to increase its fleet business and focus on Europe for growing results in 2022. Overall, the Company would utilize the financial strength to achieve robust business growth for the core fleet operations and generate long term returns for the shareholders.

Considering the decent FY21 financial performance, better leverage position as compared to the industry, robust new fleet subscription growth, consistent dividend payments, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Quartix Technologies PLC at the current price of GBX 385.00 (as on 20 January 2022 at 12:27 PM GMT), with lower-double digit upside potential based on 49.31x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios. 

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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