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MTI Wireless Edge (LON:MWE) - Post-merger, all on track
Valuation/conclusion - elevated dividend yield
In spite of the recent recovery in the share price, the shares are still trading on a prospective price/earnings (P/E) multiple of just 7.4x (2019e) and offering a 2019e dividend yield of 6.7%. We believe that these metrics, and in particular the high dividend yield, represent a surprisingly low valuation for a company with MTI Wireless Edge's growth outlook.
The table below summarises our financial forecasts, using pro-forma (merger inclusive) data for 2017 and for 2018e.
|Revenues by division, 2018e (pf)|
|Source: Proactive Research estimates|
The chart above shows our revenues expectations for FY 2018e by operating division, specifying the former MTI Computers and former MTI Wireless Edge businesses. The merger has provided the company with a broadened revenue base, with strong growth drivers across all businesses.
The next chart shows how the merger affected the shareholder structure. The simplified structure should ultimately prove to be a positive for share valuation in our view; however, the shares have actually devalued somewhat in recent months. It is possible that this could be the result of some post-merger selling, possibly by some holders of the former Tel Aviv-listed MTCO.TA exiting the London-listed combined entity; however, we are not able to identify any specific selling trend along these lines. We believe that the share buyback announced on 24 January should help to stabilise the share price while the London market becomes familiar with the enlarged company.
|Source: Company data|
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