AIM may boast of being the growth market of the world' but for Matica, the small Italian company which joined the party last April, the experience so far has not been a happy one.
Having raised £1.9m on its flotation last April through selling new shares at £1 each it has seen its share price slide to 43.5p. At this level Matica (LON:MAT) is valued at less than £5m in spite of broker forecasts of £15m of sales this year and an £800,000 profit, rising to £16.5m and £1.4m respectively in 2009.
It is true that Matica is not quite blameless. It was obliged to disappoint the market's expectations for 2007, although in part that was because such expectations were predicated upon Matica raising more money that it was able to do last April. And it has also seen changes at the top with the arrival of a new chairman in January, closely followed by the departure of the chief operating officer. But the new chairman is convinced that the market is undervaluing Matica and he should know.
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He is Gary Holland and for ten years until 1992 he was chief operating officer of DataCard, growing it to become the dominant worldwide manufacturer of the machines that make, print and distribute all those plastic cards that we carry around in our wallets.
Holland, an American, is now 66 years old and I asked him why he wanted to get involved with Matica, a minnow in a pond dominated by a whale. 'It was the technology,' he told me. 'Within a short space of time Matica has assembled world-beating technology. And this is important because changes in technology drive the card industry. Today, embedded chips are taking over from magnetic strips and Europe leads the USA in chip technology.'
Having last year acquired the Austrian company Digicard, which has a particular expertise in high-performance thermal printing for plastic cards, and Italy's Fractalos, which has innovative high speed embossing technology, Matica is now the only company worldwide that can offer a complete range of products using the latest technology.
And, says Holland, 'DataCard is still using some systems that are twenty years old. DataCard is now like IBM used to be, when everybody said that it was so dominant that it could never be challenged. But customers want an alternative to DataCard. They suspect that they are being ripped off and are ready and willing to support Matica.'
So Matica is preparing to do battle with the Minneapolis-based DataCard, which is owned by the Quandt family of BMW fame. In Matica's favour is the fact that the underlying market is growing fast.
Last year almost 20 billion cards were produced worldwide but that figure is expected to be closer to 30 billion by 2010. Growth is especially fast in the emerging markets of Middle East and Asia, but even in the more mature western markets, where you may think that we already carry more than enough cards, there is new demand for products such as biometric identity cards, SIM cards, public transport tickets, loyalty cards and gift cards.
The latter are growing fast and are especially popular with retailers for good reason. They receive the cash upon sale of the gift card which will not be redeemed until sometime later, and then not always in full.
As well as the increasing number of cards there is also an evolution of technology, in particular away from the magnetic strip and towards the embedded chip, driven in particular by global security concerns.
So with expertise in embossing, including of those metal labels that you find under the bonnet of your motor car, of thermal printing, and of laser engraving, Matica can offer machines ranging from a small desk-top units with which a retailer can instantly make a loyalty card, to the very high-end machines that make over 2,000 secure cards per hour.
Matica sells through one hundred distributors and plans to exploit the fast growth of emerging markets and ultimately to tackle DataCard in its own North American backyard. It won't be easy, but Holland, along with Matica's founder and CEO Sandro Camilleri, is sure it can be done. It would help, though, if AIM could live up to its own billing and come up with the finance that Matica needs to accelerate its progress.
This article is taken from Tom Bulford's free daily email, Penny Sleuth'.
Tom worked as a fund manager in the City of London and in Hong Kong for over 20 years. As a director with Schroder Investment Management International he was responsible for £2 billion of foreign clients' money, and launched what became Argentina's largest mutual fund.
Now working from his home in Oxfordshire, Tom Bulford helps private investors with his premium tipping newsletter, Red Hot Biotech Alert.
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