One FTSE AIM Stock to Punt on - Quartix Technologies

Quartix Technologies PLC

Quartix Technologies PLC (LON: QTX) is an FTSE AIM All-Share listed entity that provides vehicle tracking systems and services to the fleet and insurance sectors.

QTX has scheduled the payment of the final dividend on 29 April 2022, to shareholders on the register as of 1 April 2022.

Investment Highlights – Speculative Buy at GBX 375.00

• Promising Outlook: QTX expects a planned acceleration of growth following the strong fleet subscription base growth in all regions. By the end of FY23, it targets to deliver annualized recurring revenue of at least £30.0 million.
• Key Performing Indicators: During FY21, there was an 18.3% and 9.1% year-on-year growth in new units of fleet subscription and annualized recurring revenue, respectively.
• Long-term Growth Driver: The increased emergence of the Internet of Things, and smart city technologies are likely to drive the potential of the telematics market.
• Technical Indicator: From a technical standpoint, the 14-day RSI (~8.19) is in the oversold zone, while the share price is hovering close to the lower Bollinger Band.
• Better Profitability: In FY21, net margin and return on equity were higher than the industry median of 10.30% and 14.50%, respectively.

Key Risks

• New Car Sales Slump: Subdued new car registrations in the UK against the pre-pandemic level due to the global semiconductor shortage can eventually impact the Company’s business.
• Macroeconomic Concerns: The concerns regarding the Russian-Ukraine war monetary policy tightening, British inflation worries, soaring energy prices, labour shortages, and logistical issues can dampen the investor sentiments against this penny stock.

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

  (Source: Company Website)

• Group Revenue: During FY21, the Group revenue decreased to £25.5 million (2020: £25.8 million) as insurance revenue was significantly down.
• Profitability: The profit before tax was declined by 6.6% to £5.3 million (2020: £5.7 million).

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22) (Illustrative)

 *Peers: Eleco PLC, Bango PLC, and Oxford Metrics PLC.

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

 Conclusion

The economic reopening shall boost traffic on roads leading to the increase in insurance buyers and the requirement for vehicle tracking systems.

Based on the fleet revenue increase, resilience profitability, increased subscription, with support from the valuation as done using the above method, we have given a “SPECULATIVE BUY” recommendation on Quartix Technologies PLC at the closing market price of GBX 375.00 (as of 21 March 2022), with lower double-digit upside potential based 46.15x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

Nevertheless, 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 decisions should be made depending on the investors’ appetite for 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 is subject to the factors discussed above.

Note 3: Target Price refers to a price level that 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.’

Note 5: Dividend Yield may vary as per the stock price movement.

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 the 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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