Pointer Telocation Ltd (NASDAQ:PNTR) achieved a strong performance in both product and services revenues in the third quarter supported by 16% y-o-y organic subscriber growth and a boost to product margins from increased sales of higher-quality telematics units. PNTR looks set to derive substantial cost synergies in 2018 from the integration of Cielo Telecom’s operations in Brazil and we foresee the potential for the new CelloTrack Nano IoT tracker product to emerge as a major profit driver following strong recent interest in the market. We have increased our 2017 and 2018 EBITDA forecasts and reduced our fair discount to peer multiples, resulting in an increase in our peer multiple valuation from $15.4 to $19.3 (NIS 67.8) per share, and an 11% increase in our DCF valuation to $18.1 (NIS 63.6)per share.
Third quarter brings good organic growth & margins
Third quarter results were boosted by faster growth in organic subscriber additions than in previous quarters, which resulted in 16% y-o-y organic subscriber growth and a 26% increase in headline subscribers after acquisitions. Revenues per user remained stable in spite of the addition of lower ARPU ride share customers in the US, while operating leverage and high product margins led to a 65% y-o-y increase in EBITDA.
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