MTI Wireless Edge – price fall reaction after results creates buying opportunity, shares now 59.50p, brokers valuation raised 25% to 100p

18.03.2025

The market’s reaction to yesterday’s Finals 2024 announcement from MTI Wireless Edge (LON:MWE) knocked the shares for six – dropping them by 12.65%, some 8.65p lower at 59.50p.

We already knew that the group’s marketplace was creating some challenging conditions, so I consider that the subsequent price fall was overdone and now offers risk-tolerant investors an attractive buying opportunity.

The End-December 2024 Results

The Israeli-based technology group, which is focused on comprehensive communication and radio frequency solutions across multiple sectors, reported that its revenues for the year were steady at $45.6m, while its pre-tax profits were $4.81m ($4.84m), while its actual earnings per share increased 9% to 4.99c (4.58c), with a 6% higher dividend of 3.3c (3.1c).

The group’s three core divisions: Antenna; Water Control & Management; and Distribution & Professional Consulting Services – reported that demand remains high and is expected to grow.

Obviously, with the Defence Sector really perking up currently, there signs of very positive momentum which should significantly boost still further, the group’s current record Order Book.

The company stated that the defence market, which was already expanding, is now poised for even greater growth due to actions taken by the new US government.

In response, European governments have unveiled plans for significantly increased defence spending, and MTI is well-positioned to benefit.

Enquiries for military related orders (both for military antennas and distribution of components, including PSK's solution offerings) have increased to support expanded budgets and our pipeline of potential orders is higher than we have ever seen.

Management Comment

CEO Moni Borovitz stated that:

"We are proud of these results which show good progress during a period of extremely difficult conditions in Israel.

The business again proved its resilience, operating largely as normal and our target end-markets remain buoyant.

In particular, the increase in defence budgets worldwide and the opening of the Indian market for E-Band 5G backhaul present substantial opportunities for us over the medium term.

Fundamentally, our core business remains strong, with three well-established and well-led divisions focused on three substantial growth markets, all of which leverage the Group's core expertise in radio frequency communications technology.

Looking ahead, the business is in an excellent financial position with net cash of US$6m at the year end, even after investing approximately US$1.3m in our own shares under the buyback programme.

Furthermore, we believe we are well placed for 2025, given the size of our record order backlog which stands at over US$25m and the anticipated global increase in defence spending."

Outlook

Chairman Zvi Borovitz declared that:

“MTI is a growth business operating in growth markets.

Our products and services are in demand across all three divisions.

We continue to invest in innovation, product development and acquisitions when the opportunities arise, whilst always remaining focused on radio frequency communications which lies at the heart of our success.

2025 has undoubtedly started well for the Company with an increased backlog and pipeline of opportunities across all of our three divisions.

We are therefore looking forward to delivering a year of growth and increased returns for our shareholders.”

Broker’s Views

Analyst Rob Sanders, at Shore Capital Markets, responded positively to the group’s results, while increasing by 25% his DCF-derived fair value for the group’s shares from 80p to 100p, based upon conservative forecast assumptions on the group’s organic growth, which could be boosted by bolt-on acquisitions.

For 2025 he estimates $51.5m ($45.6m) revenues, $5.2m ($4.8m) adjusted pre-tax profits, earnings of 5.1c (5.0c) and a dividend of 3.4c (3.3c) per share.

His estimates for the 2026 year are for revenues of $55.0m ($51.5m), with pre-tax profits of $5.6m ($5.2m), lifting earnings to 5.4c (5.1c) and a dividend of 3.6c (3.4c) per share.

For 2027 he goes for $57.7m sales, $5.9m profits, 5.8c earnings and a dividend of 3.7c per share.

Highlighting the group’s cash generation, he sees its net cash rising from the year-end 2024 $6.0m to $8.5m this year, then $9.9m in 2026 and $11.5m cash at end 2027 – bolt-on acquisitions permitting.

Over at Allenby Capital, analyst David Johnston lifted his fair value for the group’s shares from 75p to 83p each.

He declared that the group put up a creditable performance given the challenging local market conditions in Israel, and with each division remaining profitable.

For this year he upgraded his estimates to $50.5m in revenues, $5.3m profits, and 5.22c earnings per share.

His 2026 revised upwards revenue figure shows $54.5m, with profits of $5.83m and earnings of 5.66c per share.

My View

On the face of what I can see in these results, its record order book, its debt-free, cash-laden balance sheet, and a big potential for global sales within the Defence Sector – MTI Wireless Edge shares at the current 59.50p are certainly on the bargain shelf!

A week ago, this group’s shares reached 70.90p, they will be back up there again and going above very soon.

Don’t miss this opportunity to buy cheap stock.

(Profile 25.09.24 @ 49.50p set a Target Price of 62p*)