Web Site
Google Finance
SEC Filing
Sept. 12, 2012
2012 Q2 Data
Check list:
1.Major Business.
SVR(Stolen Vehicle Recovery) Service: 75%.
AVL(Automatic Vehicle Location) Device: 25%.
Israel: 50%, Brazil: 40%, Argentina :10%. U.S: very few.
2.Balance sheet.
Recent Price:$12, Tangible book value:$3.30, Share outstanding:21m*, Market Cap: $250m.
Current asset:$82m, Current liability:$42m, Debt: very few, Inventory::$12m, Cash: $23m.
*It has 2.5m in treasury share which seems mistakenly counted in Google finance.
3.Credit facility.
Not important
4.Financial data by years.
| 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 150 | 160 | 148 | 121 | 133 | 125 | 104 | 90 | 78 | 64 | 50 |
| OP Income | 29.9 | 26.6 | 30.7 | 24.4 | 25.7 | 23.3 | 24.7 | 19.9 | 18.3 | 10.3 | 4.3 |
| Income/s | 1.19 | 1.01 | 0.42 | 0.87 | 0.69 | 2.20 | 0.82 | 0.71 | 0.58 | 0.31 | 0.05 |
| CF-WC | 43.5 | 38.2 | 40.4 | 31.7 | 24.8 | 25.5 | 23.8 | 19.2 | 17.2 | 11 | |
| CAPX | 9.7 | 16.2 | 18.4 | 15.7 | 17.0 | 18.2 | 14.3 | 3.5 | 2.4 | 2.3 | |
| Dividend | 33.3 | 22.5 | 31.6 | 3.7 | 29.1 | 4.8 | 3.7 | 2.7 | 1.3 | 0 | |
| Compensation | 5.2 | 4.4 | 4.7 | 4.5 | 3.7 | 3.6 | 2.9 |
5.Cost structure
Service based. Inventory is very low.
6.Insider holding, options, Insider trading info, share buy back.
Moked Ituran: 5.5m, 26%.
Izzy Sheratzky(President, co-founder): 267k + 2.64m(48% of Moked Ituran): 13.8%
Yehuda Kahane(Director, co-founder): 550k+1.43m (26% of Moked Ituran): 10%
Kurz family: 1.43m (26% of Moked Ituran): 6.8%
7.Management compensation.
see above.
8.Employee numbers. Revenue/Employee. Compensation/Employee.
1277 at 2011. 1315 at 2010, 1355 at 2009.
9.Industry comparison.
LoJack: (NASDAQ: LOJN) U.S most known brand for SVR. It only charge $600-$650 for equipment and the service is free. Another difference is it puts equipment in police car and the car will only send out signal after report stolen. While ITRN device will always send out signals to several base station which make its position always live. This is better model since it is possible to put other service on top. ITRN doesn't compete with LoJack except small numbers in U.S.
OnStar: GM service, it also includes other functions like "Remote Start" etc. Cost about $20 per month.
In Brazil, there are two or three private companies and one of them has 180k customers.
10.Auditor
GRANT THORNTON ISRAEL.
11.Major events.
(1) Sold Telematics Wireless to ST for $90m at end of 2007. At Oct. 2010, it was adjusted by decrease $4.4m from it.
(2) July 2010, San Paulo tax agency intent to grab $40m tax + $40m penalty from ITRN. Based on conference call, this might take years of litigation process.
(3) At 2010, $14.7m was recorded as litigation cost on Leonardo case. Total $22.5 was paid to Leonardo at Oct. 2011. At July 2012, recovered around $6.7m by court order.
12.Comments.
(1) It might be some risk for doing business in Brazil as the government is more corrupted. As you can see the $80 tax issue in Brazil.
(2) In Brazil, the vehicle lost ratio is quite high as close to 1%. Brazil introduced a CONTRAN Regulation 245 at 2007 which will require new cars sold in Brazil to install tracking devices. It has been postponed many time to Jan. 2013 to implement. It is very likely be postponed in the future. In Brazil, annually there are 3.5m new cars with only 200k will sign up SVR.
(3) In Israel, it is mono play which have 75%-80% market share. It is cash generator. Currently the company has 220k subscriber in Brazil. Above 30% market share. With 3% churn rate reported by ITRN, it would add at list 60k to 80k new customers each years which should be 30%-40% of new SVR subscribers in Brazil.
(4) The CAPX 2012 start to fall as only $3.8m for first 6 months. This trend might continue to future since they start to recycle used devices. Actually the most of CAPX in the past should be categorised as expense since they are for the lease device users never return them after ending their services.
(5) The management compensation are quite high. However, business margin is quite good as well.
(6) The dividend rate are quite high, however, 25% withholding tax will be charged by Israel government.
(7) If in future the Capx remain low, the FCF-WC would be over $30m/year. Even with past level, it will be around $22m which is close to 10% of current market caps. Without counting its solid grows in Brazil, this is not a bad price. Over all, it's very competitive business and well managed.
13.Others.
http://www.frankvoisin.com/2012/08/03/ituran-securing-vehicles-and-profits-with-a-considerable-free-growth-option-itrn/
I think there is a small error in the post that management owns 50% of shares. It should be about 30%. Also I have different opinion on two: (1) The 245 regulation will not likely or never be implemented in the future. (2) Calc the company value based on user numbers and price/user paid by other acquisition is not applicable.
Update June 10, 2013
(1)Quality score should be 9. Because both income and revenue growing every well.
(2)Average FCF-WC for the past 5 years is around $20/year. It comes a base price 20/21*15=$14.29.
(3)It is pity that I haven't worked out the formula at the first time. Otherwise the $12 price is pretty attractive.
