RE:Good results PI does not formally cover it, but put out a note today on Webtechs good results, they mention the obvious that Webtech has a very low valuation and is a prime takeover candidate, trading at .5x EV/Sales and most transaction at 2.6x...as well BSM (GPS-V) trades at a very high multiple compared to WEW, would be very accretive for them to buy Webtech..here is PI comment below
Getting back on track
EVENT: WebTech reported strong quarterly results for Q2FY13 (ending
June 30, 2013). WebTech achieved revenue of $8.1M and Adj. EBITDA
of $1.1M, compared to revenue of $7.2M and an Adj. EBITDA of $0.2M
in Q2 of last year. The Company’s cash balance increased to $21.3M
(plus $3.2M of restricted cash) compared to $5.5M a year ago.
WebTech’s cash balance was boosted following the sale of its NextBus
business for $20.75M in January 2013.
DISCUSSION: The Company’s revenue increase was driven by
hardware deliveries to a large Fortune 100 customer. Recurring revenue
increased to $4.6M in the quarter versus $4.5M in Q2FY12. Recurring
revenue accounted for 57% of the total revenue in the quarter. The
Company’s subscriber base increased to 79,000 at the end of June 30,
2013, compared to 72,000 at Dec. 31, 2012. Gross margin for the
second quarter of 61% was higher than 57% reported in Q2 of last year.
The Company generated $455K in positive cash flow from operations in
Q2. WebTech achieved a profitable quarter with net income of $1.0M or
$0.01 per share.
IMPACT: Positive. WebTech is back on track with higher revenue,
better margins, lower expenses, improved profitability and a growing
subscriber base.
FORECAST/OUTLOOK: According to management, WebTech’s sales
funnel looks strong. The Company expects to achieve growth driven by
increasing regulations in the transportation sector and greater awareness
of WebTech’s solutions. Management is expecting normal seasonality
with Q3 slightly lower than Q2, but then recovery and growth in Q4 and
Q1FY14.
VALUATION: WebTech has an enterprise value of only $15.7M despite
having a recurring revenue run-rate of almost $19M and a strong balance
sheet. WebTech is currently valued at a trailing twelve months (TTM)
EV/Sales multiple of 0.5x. Acquisitions in the fleet telematics market
have been in the range of 2.6x EV/Sales (TTM).
RECOMMENDATION: We believe WebTech may be a prime takeover
candidate given the Company is now profitable with increasing revenue,
has a strong balance sheet and is generating positive cash flows.
WebTech is a non-covered Company, hence we do not provide a target
price or recommendation. WebTech is a micro-cap technology Company
with low trading volumes and high volatility.