Today's car makers assemble many cars according to the specifications of their customers. BMW, for example, assembles 1,000 cars a day in its Regensburg plant in Germany with all the customisation - from, say, dark chrome alloy wheels to Dakota leather upholstery - fitted while the car is moving down the assembly line. BMW must ensure that the process is as efficient as possible, since errors will eat straight into its profits. And this is where Aim-traded Ubisense comes in.
- Operates in unpenetrated high-growth market
- Record order book for 2012
- Tried and tested products
- DCF-based price target of 269p
- Rating already high
- Spending needed to boost margins
The group's real-time location software (RTLS) is an indoor radar system in the assembly plant that tracks each car based on its proximity to fixed and mobile parts, tools and even BMW's employees. This results in greater efficiency, fewer defects and errors, and subsequently cost savings for the car maker. BMW has now rolled out the system in plants in South Carolina, China and even its Mini plant in Oxford.
A recent tie-up with industrial tools maker Atlas Copco has also helped Ubisense secure high-profile customers, including Audi, Jaguar Land Rover and GM. Its the system is used in the aviation industry, too. EADS uses the kit to track the assembly of its Airbus, as parts come together from around the globe.
Even so, the use of tracking and locating software is still in its infancy. Airbus has increased deployment of RTLS to nine sites from five, but that's still just a sixth of its plants. Accordingly, this is the fastest-growing part of Ubisense, with sales surging 51 per cent in 2011 to £8.7m. The RTLS division doubled bookings in 2011, as a result of more work from existing customers, such as BMW, and deals with new ones, such as Eurocopter and Toyota. So Ubisense began 2012 with a record order book, and analysts at broker Cannaccord expect RTLS revenues to grow 43 per cent this year; that looks feasible as they also expect demand for tracking software to grow by 34 per cent a year until 2018.
UBISENSE (UBI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 215p | MARKET VALUE: | £46.7m | |
| TOUCH: | 210-215p | 12-MONTH HIGH: | 241p | LOW: 180p |
| DIVIDEND YIELD: | nil | PE RATIO: | 40 | |
| NET ASSET VALUE: | 89p | NET CASH: | £6m | |
| Year to 31 Dec | Revenue (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 17.7 | 0.40 | 3.3 | nil |
| 2011 | 23.8 | 0.14 | 0.2 | nil |
| 2012* | 28.5 | 1.00 | 5.4 | nil |
| 2013* | 33.4 | 2.30 | 9.9 | nil |
| % change | +17 | +130 | +83 | – |
Normal market size: 1,000 Market makers: 4 *Canaccord Genuity forecasts (profits and earnings are not comparable with historic figures) | ||||
But the largest part of Ubisense is its geospatial unit, which uses the same technology to map fixed assets for telecoms, petrochemicals and utilities companies such as Exxon Mobile and Deutsche Telekom. These companies use mapping technology to help maintain their assets, which improves efficiency and saves costs. The unit enjoys solid growth, with revenues rising 27 per cent in 2011 to £15m. Ubisense's bosses expect demand for geospatial tracking to grow by between 6 and 8 per cent per year, driven by the need to use fixed assets as efficiently as possible and by the demands of regulation.
Recent acquisitions have brought more profitable products on board, too. These should help drive geospatial's gross profit margins from 25 per cent to 30 per cent over the next few years, but that process will also require heavy up-front spending.
