Overview
Micronet Enertec Technologies, Inc. (NASDAQ: MICT) operates through two subsidiaries, Enertec Systems, a wholly-owned subsidiary and Micronet, a consolidated subsidiary (controlling interest). Enertec Systems operates in the defense/aerospace markets and designs, develops, manufactures and supplies various customized military computer-based systems for missile defense systems, command and control centers and other systems. Micronet operates in the commercial mobile resource management (MRM) market and designs, develops, manufactures and sells rugged mobile computing devices for fleet operators and field work forces.
The Board of Directors has approved the spin-off of its aerospace and defense division as of March 31, 2017. The intention is to quickly register it as a publicly traded standalone company in which current shareholders of Micronet Enertec will own the same portion of the outstanding shares of common stock in the new company, on a pro-rata basis.
The company has a joint venture in India with Amertec Systems Pvt. Ltd. which manufactures electronic systems for the defense sector.
Micronet Enertec was founded in 2002 and went public in 2004. It is headquartered in Salt Lake City, Utah and incorporated in Delaware. The company’s R&D office is in Tel Aviv, Israel.
Recent News
On August 7, 2017, Micronet Enertec Technologies, Inc. (NASDAQ: MICT), announced today that its wholly-owned subsidiary, Enertec Systems 2001 Ltd., was recently awarded two purchase orders for an aggregate amount of $1,200,000 from a current customer, a large global Aerospace & Defense contractor.
One purchase order, in the amount of $820,000, is for the development of a fully ruggedized, weather proofed military computer-based system for naval use. The other purchase order, from the same contractor, in the amount of $380,000, is for the development of a computer-based test and simulation system designed to ensure the combat readiness of a critical military system.
“This order comes from one of our largest customers. Enertec’s ability to consistently deliver sophisticated, high-precision solutions that demonstrate reliably high performance, even in the most rugged environments, is driving the large number of new contracts we receive from current satisfied customers,” stated David Lucatz, Chairman and CEO of Micronet Enertec Technologies Inc.
Source: PRNewsWire
On August 3, 2017, Micronet Enertec Technologies, Inc. (NASDAQ: MICT) announced that its Mobile Resource Management (MRM) subsidiary Micronet Ltd., via its wholly owned subsidiary Micronet Inc., received purchase orders valued at approximately $4,300,000 for its recently released TREQr5 product. The orders were received from a current strategic customer, a leading fleet management solutions provider. This order is the largest order received by Micronet since 2012 and brings the Company’s backlog to $13.5 million, a record amount for the Company.
“The magnitude of these orders, and the fact that they come from one current customer, serve as further validation that Micronet’s next-generation MRM products are what customers are looking for in this robust and growing market. As the deadline for the Electronic Logging Devices (ELD) government mandate nears, Micronet expects more orders for these products. As Micronet’s competitive products continue to prove their value to its customers, we plan to focus on greater market share and building long term revenue growth in the MRM space,” said David Lucatz, Chief Executive Officer of Micronet Enertec Technologies, Inc.
TREQr5 is an innovative ruggedized telematics Android on-board computer optimized for Internet of Things (IOT) and fleet management applications. The Company expects to fulfill these orders during the following quarters.
The TREQr5 provides a comprehensive suite of fleet management products, which are key assets that help its customers focus on driver safety, efficiency and compliance, ELD and Hours of Service (HOS), driver coaching and fuel reports for local fleets and heavy duty trucks and equipment. TREQr5 improves efficiencies and safety for trucking and other fleet management operations, while also bringing truckers into compliance with the federal ELD mandate set for enforcement by the end of 2017.
Source: PRNewsWire
Markets
In 2015, the U.S. government spent $598.5 billion on military spending. With increasing global uncertainties, it does not appear that spending will decrease in the near future.
It is expected by 2019, the mobile resource management market will expand to 14 million device units with MRM hardware and service revenue growing over $4.7 billion. New regulatory requirements for the logistics industry mandating electronic logging devices for commercial vehicles and the increase in vehicle telematics are the main drivers for this growth.
Product Pipeline
Micronet, a consolidated subsidiary provides command and control rugged mobile devices and computer-based systems for the commercial mobile resource management, fleet management and aerospace markets. All products and solutions are manufactured in an ISO 9001-2008 certified facility. The products are sold in Israel, the U.S. and Europe to companies operating in outdoor and challenging work environments such as trucking, distribution, logistics, public safety and construction. All products are fully compliant with the new electronic logging device (ELD) mandate in the U.S.
Micronet’s vehicle cabin installed and portable tablets offer computing power and communication capabilities that provide fleet operators with visibility into vehicle location, fuel usage, speed and mileage.
Source: Company Presentation
Enertec Systems focuses on the aerospace & defense markets. This wholly-owned subsidiary provides high tech solutions for harsh battlefield environments. Solutions and systems are integrated into critical systems for the Israeli Air Force, Israeli Navy and by foreign defense entities.
Some solutions include:
- Ruggedized portable command control systems
- Fire control systems for missiles
- Military aircraft support systems
- Missile simulators
- Laser systems
- Power supplies and converters for military aircraft, missiles and portable ground stations
Growth Engines
As shown below, Micronet Enertec has narrowed down its growth engines to the following:
Source: Company Presentation
New Products for New Market Segments
The company has designed a next generation handheld device, the Micronet SmarTab for both in-vehicle and out-of-vehicle use:
- Fully rugged for demanding environmental conditions
- Android open system allowing for easy integration with 3rd party applications
- Smart cradle for vehicle bus interface
- Advanced sensors and processing capabilities
The second product is the Micronet SmartHub, a next generation On-Board Computer:
- Supporting Black Box capabilities
- Android open system allowing for easy integration with 3rd party applications
- Vehicle bus interface
- Advanced sensors and processing capabilities
Micronet App Store
The company will provide 3rd party application integration with its devices which will result in recurring software revenue in addition to hardware sales.
Stock Influences and Risk Factors
- Successful vendor negotiations with aerospace and defense contractors
- Growing software/hardware demand from the mobile resource management sector
- Maintaining its $50m revenue guidance by 2022
- Increased US military spending and aid to foreign governments
- New transportation regulations in regards to electronic logging devices (ELD) are upheld
- Given that the company continues to sustain losses, it will need access to additional financing in order to fund its growth engines
Financials
The company’s debt/equity ratio was at 1.8 and its current ratio was at 1.35 at the end of Q1 2017. MICT will need to seek additional financing as all of its debt matures between April 2017 and July 2019. With a high debt ratio and continuous losses, seeking additional debt financing may pose difficult, however equity financing may be the more viable option. This may lead to earnings dilution.
The net loss was $1.61m on $5.27m revenue in Q1 2017. Revenue mix is diversified as revenue is split evenly between the Micronet and Enertec subsidiaries.
MICT will be announcing its Q2 2017 earnings on August 16, 2017.
Stock Performance
MICT shares closed on August 10 at $0.92, up 1.10% from the previous day. Market capitalization is currently at $5.42 million. Trading volume was at 157,288 shares with an average trading volume of 289,976 shares. The current RSI (14) is 42.43. At $0.92 MICT shares are trading below their 50-day and 200-day moving averages at $1.02 and $1.23 respectively.
Currently 40.47% of the outstanding shares are institutionally owned.
Summary
With US military spending most likely increasing due to global uncertainties and the new regulatory requirements for electronic logging devices (ELD), these should be key growth drivers for MICT. Now that the company has defined its growth pillars for 2017 and beyond, it must meticulously execute on these pillars to successfully grow revenues.
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