Pointer Telocation Ltd (NASDAQ:PNTR) has reported solid Q1 figures backed by strong 25% subscriber growth and 7% growth in per subscriber revenues. Boosted by operating leverage this translated into wider service margins and a 43% increase in operating profit. In coming quarters, as individual fleet vehicles are equipped with PNTR’s telematics, subscriber revenues from the FEMSA and NYC taxicab contracts should start to boost group revenues. We see Q117 as a good start to the year and, with management discussing similar contracts with other companies and exploring new acquisitions, more good news is likely to follow in the coming quarters. We have increased our multiple based valuation by 26% to $13.6 (NIS48.9) per share, while maintaining our DCF valuation at $14.9 (NIS53.6) per share.
Record margins, strong ARPU and net additions
First quarter numbers showed strong momentum in non-acquisition related subscriber additions, with 9,000 organic net additions versus 5,000 in Q116. Helped by an ARPU uptick during the quarter and very strong margin growth in the mobile resource management business, led by the group’s high operating leverage, this flowed down to a 43% y-o-y increase in operating profit and a similar 44% y-o-y increase in net profit from continuing operations.
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