Quartix Technologies PLC

Quartix Technologies PLC (LON: QTX) is an FTSE AIM All-Share Index company that provides vehicle telematics and driver analytics services.  

Investment Rationale for Valuation – Speculative Buy at GBX 310.00

• Trading Update: O2 23 March 2022, the Group has reported decent growth in March 2022, which has continued from January and February 2022. The company expects a 25% increase in units installed in Q1FY22, compared to the prior corresponding period.
• ARR: Annual recurring revenue demonstrated an increase of approximately £0.7 million during Q1FY22 and on a constant currency basis.
• Growth in Fleet Revenue: In FY21, Fleet revenue grew by 7.7% to £23.8 million, compared to £22.0 million in FY20.
• Technical Indicator: The price of the stock is trading close to the lower Bollinger band with 14-day RSI level at ~19.41.

Key Risks

• Macro Risk: The current macro conditions are challenging in nature amidst the backdrop of high inflation, rising interest rates and continued impacts of the COVID-19 pandemic.     
• Mobile Internet Risk: The Group’s services depend on a functioning M2M network covering both the internet and mobile data. Any disruption or outage to the network might impact the performance of services its provides.

Performance Highlights (for the year ended 31 December 2021, as of 28 February 2022)

(Source: Company Website)

• Fleet Subscriptions: The Group reported an increase of 18.3% in fleet subscriptions (new units) to 50,765 in FY21, compared to 42,898 reported in FY20.       
• Recurring Revenue: Fleet invoiced recurring revenue increased by 8.2% to £22.50 million in FY21, from £20.80 million in FY20.

One Year Share Price Chart

(Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22E)

*Peers: Few peers considered are Zoo Digital Group PLC, accesso Technology Group PLC and Microlise Group PLC.

*All selected peers are LSE-listed Companies from the Technology sector.  

Conclusion

Based on the decent performance, increase in units installed 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 market price of GBX 310.00 (as of 09 June 22, at 11:35 AM GMT+1) with lower double-digit upside potential based on 37.96x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

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: 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.

Note 4: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

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 unfavorable movement in the stock prices.

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