Trakm8 Share Discussion Threads

[walbrock82] 28/11/2017 07:34

I'm not for and against Trakm8 as a company. I just interpret the numbers and look at the history of their previous performance.

I am not the only one who has some concerns, Graham Neary at Stockopedia share the same views, although he is positive about Trakm8 interims.

[robcullum] 27/11/2017 23:10

Trakm8 tipped in TrendWatch:

[blondeamon] 27/11/2017 22:26

Agreed, cash situation is not ideal but why judge a high-growth tech company like a 100-year old insurance company? Cash has vastly improved since year end which was the market's main worry.

They have some top notch products now, they could be sitting in £10m cash if they wanted to but then they would eventually lose in this competitive climate. ADAS features coming soon(2018), take a look at LON:SEE to realise the potential. TRAK will be providing telematics/4G HD Camera/Route Optimisation and ADAS all in one device. Who else in the world does that? Putting cash into R&D can pay off big.

My only problem with company's progress is RouteMonkey. They're not bringing in any bacon and Colin Ferguson should be fired, he has failed spectacularly on all KPIs. They're involved in a boatload of EU projects which I thought would show some grant income this time around but seems like they're just wasting time. Their product is amazing but the company is not sales-oriented, not booking enough contracts to justify the £6m paid for them. Even Roadsense brought in lots of revenue and devices with it and it was a tiny deal. It helped them book Iceland which is the biggest Fleet contract but other than that it still has a long way to go to prove itself. I hope there will be more action on the EV space from them this year.

I hope the new CFO, Jon Furber will make a positive change. He has experience in running tech companies and selling them at a high price. (AppSense)

"Experienced, pro-active and hands-on CFO in entrepreneurial, high-growth companies in the technology sector.
Particular specialisms are:
- M&A activity, having led multinational software business AppSense through a trade sale;
- Managing external investors, including Goldman Sachs;
- Leading companies through growth and international expansion;
- Managing integrations, re-organisations and rationalisations;
- Driving business transformation; and
- Embedding business processes, performance measurement and management"

[henchard] 27/11/2017 21:29

blondeamon,

Thanks for the explanation of the device set-up timeline and economics (first month usually free etc).

I have my doubts about future margins due to the ongoing trend of lower service fees per unit for the same functionality. And how much TRAK will have to spend on R&D to offset or partially offset this trend with higher value added stuff.

However, I've no insight into how this will play out. All I can do is look at the cash flow statements for signs that cash generation is rapidly increasing. So far, I'm not seeing it but I will look at H2 when the FY results come out.

[allstar4eva] 27/11/2017 21:23

I think some of the concerns raised by various people re: the status of cashflow may be addresed by the comment below from results. The change to monthly payment models (inc SAAS) perhaps hasn't been fully understood by the market...?

"...The transition of more customers to monthly payment models (including SaaS) has continued to take place which impacts up front cash generation,..."

[blondeamon] 27/11/2017 20:48

Henchard, the juicy fleet Telematics margins take 3-4 months to show up.

First month is usually free and as this is SaaS you need a few months to break even.

With an average device cost between £10-20 and other expenses(sim, sales cost etc) adding another month to expenses I'd estimate 3-4 months to break even with an average of £13 pcm.

From that point onwards, for as long as the device is there (usually years) you just collect a hefty fee with close to 95% margins. The more devices, the more it becomes a cash cow.

Now all these contracts were signed sometime within H1 and take some time to setup, for example Calor Gas/Iceland which needs fitting took months until they got all the trucks done.

It's on H2 and onwards that you will see the benefit of those devices. Did you notice how the company underestimated recurring revenue between the TU and the H1? It said 15% at first but it was reported 17% today.

That's because it is very hard to measure this in such a level, those fees just keep piling up and profits compound. Keep an eye on those numbers as it's the bedrock of the company's financial stability. The more they rise the higher the support levels for TRAK will be and the higher the growth potential from there.

[allstar4eva] 27/11/2017 20:44

The tone from these results did not match the very upbeat tone of the trading update imho and this may have affected the share price performance today. Still looks undervalued to me however perhaps not by quite the same margin - some new contract wins may be required to push on from here. On next year's forcasts these look very cheap however we may be required to prove that this year's forecasts are in the bag before looking too far ahead at next year's earnings. Agree with others re: being a good candidate for take a over.

[kmann] 27/11/2017 20:29

A good aquisition for AVIVA imo or any pther large onsirance company

[henchard] 27/11/2017 20:01

Just to give a counterbalance to the positive view of results.

A table in this article

suggests that but for working capital movement and the £1.6m tax credit, cash flow for the latest 6 months was little better than in the same 6 months two years ago. Furthermore, there was £1.8m of capitalised development costs this time versus £0.6m in the 2015 period.

I'd have expected a much better performance. Shouldn't the "delayed" contract wins of fiscal 2016/17 have come through this H1? And shouldn't H1 be showing rewards from the "significant investment in preparation for growth" made in fiscal 2016/17? And why has the £6m Route Monkey acquisition added nothing to the current level of cash flow TRAK is generating compared with the period before it was bought?

With no real cash flow backing, is this just a "greater fool theory" investment? The company itself seems to suggest so, according to the last annual results: "... the Board notes that recent corporate consolidation has valued target companies on the basis of revenue and installed base, rather than on profitability and cash flows, such is the growth profile of the telematics industry."

[blondeamon] 27/11/2017 19:43

Trakm8prime is another product from trakm8 that hit the market hard recently with a new website and a brand marketing campaign. Looks to be a very professional setup with some of its best tech features on a very reasonable price.

Article today from Fleet World, from one of their clients.

"Scottish IT company Capito has reported numerous benefits including increased driver safety and decreased fuel usage as a result of implementing vehicle tracking from Trakm8"

[michaelmouse] 27/11/2017 18:35

1pi - Interim results were pretty much already known when they released the detailed trading update in October. In my experience, this means results day is often a damp squib for most companies unless there are any additional surprises included.

I never try and predict short term movements in a share price and prefer to leave that to traders. One thing for sure though, any contract news and/or trading ahead statements in the next few weeks/months and the share price will make very good progress upwards from these levels.

I'm very much in for the long game, and hope for significant share price appreciation.

[1pi] 27/11/2017 17:50

A good summary michaelmouse, thanks for sharing. I managed to catch these shares when they dipped to the sub £1 region and have been happy with the uplift seen of recent weeks. I would have expected a better market reaction after reading the results this morning though... any thoughts as to why or do you think there might be a delayed reaction around the corner? It's all speculation of course.

[jamiemp] 27/11/2017 17:46

I agree with a lot of that. I think the value here is a buyout driven by cost-synergies, with someone taking the contracts and technology and gutting the overhead. Seeing some of the numbers thrown about for "investment" in sales/business development, this could be a nice bolt on for someone.

[michaelmouse] 27/11/2017 17:05

Just my few thoughts.

[walbrock82] 27/11/2017 14:55

Brief Update

Trakm8 reported an increase in revenue to £14.7m, as operating profit shot up to £806k from £362k, as well as Basic EPS rising to 2.97 pence from 0.88 pence.

Looking at Trakm8 divisions, their solutions division saw sales grew to £12.48m (2016: £9.69m), whereas Product Sales amounted to £2.27m (2016: £3.49m), a reduction of 35% on last year.
Also, they managed to increase recurring revenue by 17% to £5.48m. They have undrawn credit facility of £3.7m at HSBC, as of 30 September 2017.

Management Outlook

Management remains optimistic about the second-half by stating they have visibility to support our second half expectations because of substantial new contracts in place. The Board remains confident that the market expectations will be met for the full year.

Financials in Detail

Although net assets rose to £21.37m from £20.23m, this can be attributed to rising intangible assets of £18.1m from £17.1m.
But, the greater than expected net cash profit was attributed by the following:
1). Income tax awarded for R&D tax credit of £1.64m;
2). A cash inflow of £200k from movement in working capital, compared to £1.2m cash outflow last year.

Net debt improved to £2.32m from £4.4m, helped by a £2m placing and supported by higher than expected net cash profit.

There are two things that concern me, these are:
1). No mentioned dividends and
2). Capitalised development costs rising to £1.76m from £1.45m because there is no explanation what constitute these costs. But the company did capitalise £300k of engineering, sales and marketing expenditure.

Overall the results were Okay.

To read more on Trakm8, it includes analysis of:
1). Trends in development costs;
2). Quality of shareholders’ equity;
3). Share price pattern;
4). And the list of contract wins and extensions.

Then, click

[blondeamon] 27/11/2017 12:58

Fair enough, this share is not for traders. The story here is quite remarkable but won't happen overnight. All the signs are there for another IQE type of growth but i will happen in stages over the years.

The new deals they made in Europe were not mentioned at all, they are playing it shy but they are planning to ship the product to Ireland and Austria within 2018 so it's going to be quite big.

Recurring revenues and device growth both roaring ahead, as long as these have double digit growth the re-rating is only a matter of time. My guess is on February they'll say they are modestly ahead.

[nurdin] 27/11/2017 12:56

Yes accepted, but capitalising R&D costs is a legitimate accounting practice in business such as that of TRAKS as it is an investment in long term cash generation Tax credit is pretty small as well.However I havent done my forensics properly so will reserve my judgement for now.

[mickharkins1] 27/11/2017 12:30

I sold out today. While the headline numbers look good, if you exclude the capitalised R&D costs + the tax credit, they made a loss. However, still looks like there is some upside based on the chart.

[nurdin] 27/11/2017 12:07

We can take it as given that they will meet,or possibly even exceed, this years expectations to end March 2018. In 3-4 months therefore, the stock will be trading at just 13.5x with a PEG of 0.5.That is very cheap in my books.They need to work on operating margins though..

[jamiemp] 27/11/2017 11:52

Yes, looking at a couple of dummy orders, looks like it's ready to pop up again. Was looking a bit thin around 0830.

[nurdin] 27/11/2017 11:37

hard to buy any

[stilolosses] 27/11/2017 11:30

I recently bought a considerable amount of shares in Trak. Can anyone direct me to the recent Finncap note?