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Smart Parking Ltd - Research Note - 12 Oct 2017


SmartParking Ltd (ASX: SPZ) 

A“fine” business fully funded for growth 

Smart Parking (ASX:SPZ) is a global car parkingtechnology business. The Parking Management Division manages car parksexclusively in the UK, and generates 85% of group revenue from poundsterling-denominated parking fines (parking breach notices). The TechnologyDivision has a global presence and specialises in on-street and off-street baysensor technology and data communications software (IoT). In the last reportedfinancial year (FY17), revenues at the key Parking Management Division fell 26%on the back of two substantial UK supermarket contracts ending, and an 18%(Brexit-inspired) depreciation in the GBP. We view a “rebased” FY17 as aplatform for strong revenue, and earnings growth, over the next five years.

Revenuegrowth: We believe that the pound bottomed in September at A$1.62, andforecast a modest appreciation to a long-term rate of A$1.80. More importantly,management is replacing lost low-margin manned contracts, and targeting to add120 (net) new higher-margin Automatic Number Plate Recognition (ANPR) contractsevery year. Allied with strong prospects for the Technology business, weforecast a 35% 5-year (FY17- FY22E) CAGR in group revenue.

Margin expansion: In FY17E, rental/operatingleases and employee costs equated to 55% of group revenue. As revenues grow,operating leverage should see group EBITDA margins expanding from 7% in FY17 to41% in FY22E, and EBITDA increasing from A$1.6m to A$45m over this period.

Fullyfunded: We forecast that SPZ will be cash positive (albeit modestly) inFY18E; with a healthy cash balance (A$14.2m) as at the end of June 2017, we donot see SPZ needing external financing from either the debt or equity marketsover our forecast period to fund its growth strategy.

Dividends: We forecast that SPZ shouldbe in a position to pay dividends, in FY20E (and potentially as soon as FY19E). 

12/10/2017 11:35:00 AM

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