Telit Communications sees 50% revenue growth in H1 2010

At its AGM, Telit Communications (LON:TCM) chief executive Oozi Cats told investors that the company expects to report strong year-on-year growth, over 50%, for the first half of the 2010 financial year despite being hindered by a shortage of certain components.

The company also notified investors that it will report its financial results in US Dollars going forward, due to changes in the mix of sales and the purchase of components. According to Telit, it expects H1 2010 revenues to be approximately US$56m, and first half results will be published in September. Telit also confirmed that it expects to resolve the component shortage in the second half.

The machine-2-machine (M2M) technology specialist has been gaining increasing sales momentum for its range of M2M communications modules in recent months. The company landed a new contract in May, to supply M2M modules for new Audi infotainment systems.
And significantly, in April, its Wireless Solutions subsidiary reached a major sales milestone with the delivery of its two-millionth GE864 module. The GE864 models are suitable for use in large-volume applications in the telemetry and telematics industries, whilst the extra-rugged GE864-Auto version allows the integration into vehicles and other applications.

Yesterday, Astaire Securities published a note, saying that the ongoing consolidation in the M2M sector was favourable for Telit, in view of the recent acquisition of Cinterion Wireless Modules by Gemalto, which it said showed the attraction of the M2M market as companies “looked to attach more things to the internet."

Astaire commented that the acquisition showed the attraction of the M2M market with growth across multiple sectors, including smart metering and telematics. The consideration of 1x annual sales compares favourably with Telit’s current rating, with a market cap/FY10 sales ratio of 0.4x and an EV (enterprise value)/FY10 sales ratio of 0.6x.

“We would also flag that Telit has been consistently gaining market share as previous designs wins come through. Further consolidation in the sector is to be expected,” added Astaire.