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  1. #11
    always learning ... BlackPeter's Avatar
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    interesting analysis in NBR. In a nutshell: interesting company, but ways too dear considering earnings and competitive risks:

    http://www.nbr.co.nz/article/eroad-v...ew-md-p-159689

  2. #12
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    Yeah, it's still expensive now that the confirmed IPO price is at 3 bucks. But I'm willing to set aside a small amount just to get to know the company from the start. Just been my way of knowing any stock that I'll be willing to hold long term. Hoping I'll be right ......

  3. #13
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    I will buy some to get in from the start

  4. #14
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    Anyone in on ERoad. Seems to be one of the better IPO's recently. Will it hold up?

  5. #15
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    Quote Originally Posted by smokin cubans View Post
    No - far too expensive. Who knows when - but it will crash at some point. That's not to say it won't go on a crazy geo op style upwards ride first.

    Crazy kiwi saver funds be crazy.
    I was planning to but I let my my funds got caught in the way down ride of XRO instead.

  6. #16
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    I've got this stock around 45% overvalued at the moment for my liking and thought a $2 price would have been around about right. For a company with 9 million revenue it's hard to comprehend the current share price. each to their own...

  7. #17
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    Quote Originally Posted by benjitara View Post
    I've got this stock around 45% overvalued at the moment for my liking and thought a $2 price would have been around about right. For a company with 9 million revenue it's hard to comprehend the current share price. each to their own...
    Clearly you have been too conservative with your DCF model. I think most people who use DCF subconsciously input the numbers they know will confirm their opinion of the stock. So if in fact you did use DCF, perhaps you didn't really want to buy eROAD in the first place?
    DISC: annoyed I missed out on the IPO after my broker suggesting I buy.
    No advice here. Just banter. DYOR

  8. #18
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    Quote Originally Posted by noodles View Post
    Clearly you have been too conservative with your DCF model. I think most people who use DCF subconsciously input the numbers they know will confirm their opinion of the stock. So if in fact you did use DCF, perhaps you didn't really want to buy eROAD in the first place?
    DISC: annoyed I missed out on the IPO after my broker suggesting I buy.
    I go on "owners earnings" rather than DCF models... I like the company and sector but can not invest at current levels.
    Last edited by benjitara; 17-08-2014 at 07:01 PM.

  9. #19
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    I have undertaken the following analysis from public sources. All estimates are approximate, should not be relied upon and investors should do there own research.
    Eroad is engaged in the provision of cloud based softwareusing GPS and telematics to optimise transport fleet performance. The company’ssoftware allows the recording and collection of Road User Charges (RUC) a taxbased on mileage travelled. This later capability is important indistinguishing Eroad from other telematics based businesses. The concept ofusing GPS based systems to monitor vehicle and driver performance has existedfor some time.
    Eroad in its prospectus claims to have only one competitorin the electronic RUC market in New Zealand.Examining the telematics market the extent of competition would appearto depend on how the market is defined with the ability to measure and collectRUC a critical point of difference. Researching the transport fleet managementsoftware market the following businesses appear to be participants in NewZealand:
    Smartrak;
    Amtrax;
    Xlerate Technologies;
    GPSworld;
    Gofleet;
    Imarda.com;
    International Telematics.
    The scale of the New Zealand operators varies. Imarda andInternational Telematics appear to be the larger New Zealand based businesses.Imarda NZ is engaged in the manufacture and distribution of telematics hardwareand software solutions. For the year to 31 December 2012 Imarda NZ had revenueof NZ$5.3 million down from 2011 when revenue was NZ8.4 million (note this maynot be representative of the full group). Imarda has offices in New Zealand,Australia, and the USA. Imarda was founded in 2007. The business claims to havemore than 100,000 mobile hardware units and to include Woolworths Australia andBoral Australia fleets together with one of the world’s largest freightcarriers in the US as customers.
    International Telematics was established in 2005 and isbased in Penrose. It designs hardware and software to deliver its fleetmonitoring and management system. International Telematics began North Americanoperations in 2008 and has offices in Auckland, New York, Melbourne andrecently Colorado. It is suggested that International Telematics has 15,000units active including 7,000 in North America.
    Internationally the use of GPS to monitor transport fleetperformance also appears to have developed rapidly. Internationally thefollowing companies are identifiable as broadly operating in the GPS/Telematicsspace:
    Navman Wireless;
    Mixtelematics;
    Inthinc;
    Wireless Matrix (acquired by CalAmp March 2013);
    Trimble;
    Digicore;
    FleetBoss Global Positioning Solutions;
    Teletrac Inc;
    Masternaut;
    Fleetmatics.
    Teletrac is a 25 year old Southern California company.Teletrac claims to automate 20,000 fleets, 200,000 vehicles in 87 countries andto have 500 employees.
    Masternaut claims to be Europe’s largest telematics solutionprovider with 10,000 customers, 600 staff and 300,000 assets (vehicle deployments).Masternaut is a joint venture between Summit Partners and Fleetcor TechnologiesInc.
    Mixtelematics is listed on the Johannesburg (JSE) and NewYork Stock Exchanges. Mixtelematics has subscribers in 112 countries, 900 plusemployees and as of Q1 2015 462,700 vehicle subscriptions.Mixtelematics estimates that the globalmarket for GPS/telematics is 333 million vehicles and that 2013 marketpenetration is 4%. Mixtelematics estimates that there is a potential market of33 million vehicles in South Africa and Brazil, its largest markets. Thecompany believes that globally there are less than 10 providers with more than300,000 subscribers. As a public company financial guidance is available and pricingratios can be derived. In Q3 2014 Mixtelematics achieved an EBITDA ratio of21.4%. In its most recent quarter the EBITDA margin reduced to 16.3%.For 1Q2015 the company had US$78.2 million incash on hand. Guidance for FY15 revenue is US$130 million to US$132.6 millionand for adjusted EBITDA to be between US$27.8 million and US$28.7 million (21%EBITDA margin).Full year eps guidance is 17-18 South African cents. Thesetranslate into a prospective PE of 22-23 times and an EV/EBITDA ratio of 8.5x. Theprospective EV/revenue ratio appears to be around 1.8x.
    Digicore is also listed on the JSE and states that it has1000 employees and 700,000 systems sold. Digicore is yet to report for the 2014financial year.
    CalAmp is a more broadly based machine to machine (M2M)telematics company focussing more widely than heavy transportation fleets.CalAmp states that it has 400,000 application subscribers and 3 million devicesunder management. The current market capitalisation is around US$636 millionand the company had net cash of US$28.3 million giving an enterprise value ofapproximately US$608 million. CalAmp achieved an EBITDA margin of 12.4% in FY14somewhat lower than that of Mixtelematics. FY14 revenue was US$236 millionproviding a historical EV/revenue of 2.6x. Based on FY14 EBITDA of US$29.3million the historical EV/EBITDA ratio was 20.8x. The company stated that itexpects 2015 financial performance to be similar to 2014. Consensus analystforecasts for 2015 however are US$1.15 per share placing CalAmp on aprospective PE of 15.4x.
    Particularly prominent in the GPS/telematics space is listedFleetmatics Inc based in Dublin and Boston. Fleetmatics has experiencedexplosive growth and provides a comparative for Eroad given its North Americanaspirations. In addition to the British Isles and North America, Fleetmaticshas entered the Netherlands, Mexican, Mainland Europe and Australasian markets(acquiring Connect2Field based in Sydney). In August this year Fleetmaticsachieved 500,000 vehicles under subscription with 23,000 customers as at 30June. In June the company acquired KKTSrl provider of ‘Routist’ an Italianvehicle routing optimisation technology. Fleetmatics GPS tracking andmanagement tools provide location, fuel usage, speed and mileage data and thecompany sees growth in fuel cards, driving style, Garmin and driver logfunctionality. Fleetmatics expects the fleet management market to grow fromUS$10.9 billion in 2014 to US$30.45 billion in 2018. Fleetmatics estimates 71million vehicles in North America, Europe, Latin America and Australasianmarkets with a potential revenue value of US$33 billion annually (this perhapssuggests a smaller potential global market than that of Mixtelematics).Currently (August 2014) Fleetmatics estimates its addressable market to be 31million vehicles and this market to be penetrated to 12.1%. Fleetmatics ownsubscriptions of 500,000 would therefore represent around 1.6% penetration with10.5% provided by competitors.
    Fleetmatics derives 92% of its revenue from North Americawith 78% of sales in Q214 coming from web sales. Web sales are generally madeto fleets of 1 to 75 vehicles. Field sales representatives make sales to fleetsof 75 to 500 vehicles and enterprise sales account for sales to fleets inexcess of 500 vehicles.Average monthlyvehicle cost is US$40 per month which with current subscription levels suggestsFleetmatics is on track for annualised revenues of US$240 million excludingchurn. Fleet churn was 7.9% for FY13. In Q2 FY 14 this had fallen to 1.1%.Fleetmatics is targeting an EBITDA margin of 28% in 2015 and has stated thatits long term EBITDA margin target is 30-35%. Research and development relativeto revenue in recent years has been 6-7% and the long term target is 5-6%.
    Fleetmatics guidance for the current year is for revenue ofbetween US$228 million and US$229 million. EBITDA guidance is for betweenUS$62.89 million and US$65.3 million with eps of US$0.82 to US$0.87. Thecompany had debt of US$23.8 million at its most recent result. Fleetmaticsprospective PE ratio based on guidance is approximately 38x. The prospectiveprice to revenue is around 5.5x. It appears that Fleetmatics prospectiveEnterprise multiple based on guidance is around 17.5x.
    Eroad has projected FY15 EV/EBIT of 223x to 300x and forFY16 21.9 to 29.4x. Eroad anticipates its PE ratio for FY15 to be between 182xand 230x and for FY 16 between 33x and 41x. The prospectus projects Price torevenue of 7.3x to 9.9x in FY15 and in FY16 4.1x to 5.5x.
    Eroad anticipates a low level of churn based on projectedFY15 retention of 98.2%. Based on prospectus information Eroad’s EBITDA marginis running between 40% (FY14) and 26% (FY15). This statistic may be influencedby the degree of deferred revenue released and the extent to which research anddevelopment expenses are capitalised. The extent to which research anddevelopment expense grows relative to revenue beyond the prospectus projectionsis critical to valuation outcomes as is the growth in sales and marketingexpenditure relative to the absolute level of sales growth.While the global market for GPS/telematicsappears to be vast and still underpenetrated Eroad’s particular niche of RUCvehicle jurisdictions is considerably smaller. Eroad has identified theimportance of retention of revenues and recurrence at defensible margins as keyqualitative factors in the valuation of the cloud based company. In additioninvestors also need to take into account the importance of incumbency in nonRUC markets and the benefits of first mover advantage in achieving mass andmarket recognition.
    Hope this helps investors with their own analysis of the business.
    Disclosure - not holding.


  10. #20
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    Good research. While there are only 2 RUC registered companies at the moment, I wonder how hard this will be for other cos to get if the market demands.

    The issue in the industry is fragmentation as show by all the companies you found. I note Imarda was looking to IPO a few years ago and use some of the proceeds to buy other small companies (ie. Customers). If you read all the material, it's not hard to guess their big undisclosed US customer is FedEx, plus a couple of biggies in Oz too.

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