Good signal strength
It was a brave decision. Poynting listed in July just as the sell-off in global equity markets was gaining momentum. Despite its boldness, its share price halved from R1 when it listed to its present price of around 50c. It raised a mere R20m and listed only about 20% of its shares.
Andre Fourie, the antenna manufacturer’s CEO, still feels it was the right move, despite the knock to its share price. Poynting took precautions when it listed. Fourie says the craziness in equity markets is why it decided to list just 20% of the shares.
Trade in Poynting’s shares reflect how tightly it’s held. The average volume is 635000 shares a month and it has a p:e of 2,35.
Unlike most other AltX-listed companies, Poynting wants to put more shares on the market. This will not happen soon, but the group has ambitious growth plans and needs capital to drive aggressive expansion that has doubled its revenue every year since its formation in 2001.
It expects to increase revenue from R56m to about R130m for the year to end-June 2009 on the back of doubling exports to Europe to about R20m, increasing sales to existing customers by 30% to R45m, going into new markets and introducing new products.
It is also negotiating a lucrative deal with Saab Grintek Defence
Fourie, once a university lecturer, says Poynting initially got funding from government grants and a R1,5m start-up loan from the Industrial Development Corp. But, as he puts it, “the business was never really capitalised”. This can be seen by its current liabilities of R18m and an overdraft of R4,3m.
The downturn in the market is not expected to hurt Poynting. “Even in the current economic conditions, demand for wireless is still growing fast,” says Fourie.
Several factors drive enthusiasm for wireless connectivity. An improvement in the quality of the technology used in wireless networks means there is less chance that users will experience fuzzy signals. Falling electronics prices have also made it cheaper and easier to deploy these networks.
Fourie says the group takes the view that wireless networks are going to become more widespread as demand for Internet access grows.
So far, they have been proved correct. Internet usage has doubled from 5,5% in 2000 to 10,3% in 2006 and more people are accessing the Internet via wireless technology such as 3G, used by cellphone companies — Poynting makes the transmitters — than through ADSL cables.
But the rise in Internet use is not the only factor behind the group’s success. Poynting outmanoeuvred its rivals by developing a production process that substantially reduces the cost of making important subsystems and delivers a better quality product. It plans to keep this advantage by investing 10% of its revenue in research & development.
Fourie says Poynting is in the fortunate position of not worrying about which wireless format is being carried by its antennas. For some time there has been a tussle between 3G and CDMA as the dominant wireless technology but, as Poynting antennas can transmit both, it’s not a concern. “I don’t care who wins the battle, I only care if it’s wireless,” he says.
A further boost to the group is Telkom’s announcement that it plans to create its own wireless network to compete with MTN, Vodacom and Cell C. Telkom plans to build 220 base stations by March 31, compared with Vodacom’s 7300 base stations. Though there are no sales to Telkom yet, Fourie is confident the companies will soon be talking.
The wireless trend is not limited to cellphones. Poynting makes antennas for emerging high-speed data format WiMax, iBurst base stations and WiFi hotspots.
It also has a lucrative niche in international military markets — some of its antennas are used in submarines — and mining. About half its revenue comes from abroad.
The fledgling company might be based in nondescript offices in the light industrial suburb of Wynberg, Johannesburg, but Fourie has big plans, saying: “We want to become a world-class technology company.”
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