Maytronics share up tenfold since takeover rejected

Maytronics factory Photo: Eyal Izhar

The robot cleaning company for swimming pools has been booming since US company Hayward's acquisition offer was turned down by Kibbutz Yizrael.

The quarterly financial statements of Maytronics Ltd. (TASE:MTRN), released at the end of May, sent the company's share price to a new peak giving it a market cap of over NIS 2 billion. Maytronics produces robots for cleaning swimming pools. Its current market cap places it among the 70 largest companies on the Tel Aviv Stock Exchange, and brings to mind how close controlling shareholder Kibbutz Yizrael was to selling its shares six and a half years ago in what could have been a most premature exit.

In February 2012, at the end of a tense meeting, the kibbutz members decided to reject an offer from US swimming pool equipment giant Hayward to buy the controlling stake in Maytronics at a valuation of NIS 345 million, which would mean paying the kibbutz NIS 180 million for its shares.

The offer valued Maytronics at 30% over its market cap at the time. It was a tough decision for the kibbutz members. Maytronics' share price had fallen more than 20%, partly because one of its customers, which accounted for about a quarter of its revenue, had bought a competitor company, causing investors to doubt Maytronics' ability to expand its business.

In retrospect, the rejection of Hayward's bid was a brilliant decision. Keeping its stake in Maytronics has generated value in the hundreds of millions of shekels for Kibbutz Yizrael. Maytronics' business has boomed, and its share price has shot up nearly 1,000%.

Last year, the kibbutz members decided to take advantage of Maytronics' soaring share price, and in June 2017 sold 5% of the company for NIS 75 million at a valuation of NIS 1.5 billion. As far as is known, part of the proceeds went directly to the kibbutz members and part to the company that manages its businesses.

Since that sale, the share price has climbed by a further 50%, so that the 60% of Maytronics that the kibbutz now holds is worth NIS 1.3 billion, seven times the price Hayward offered for 65% in 2012.

Maytronics develops, produces, markets, distributes, and provides technical support for swimming pool equipment, principally robots for cleaning private and public pools. It also produces automatic swimming pool covers, alarms for protecting swimmers from drowning, and other complementary products for treating swimming pool water.

At the end of 2017, Maytronics had 380 employees, 330 of them hired and 50 of them kibbutz members. The CEO is Eyal Tryber, who at the time of Hayward's offer in 2012 was the company's VP marketing, and the chairman is Yonatan Bassi, who actually supported the offer.

Almost all of Maytronics' revenue (98%) comes from overseas sales, and for some time it has been recognized as the leader in the global private pool cleaning market, in which it is estimated to have a 44% share. This business accounts for 80% of its revenue.

Since the rejection of Hayward's offer, Maytronics has continued its focus on the development of leading products in its field. Its revenue has been growing by more than 10% a year, reaching NIS 640 million in 2017, almost double the company's revenue in 2012. Maytronic's net profits have also been mounting, reaching NIS 81 million in 2017, 125% more than its NIS 36 million net profit in 2012 and 17% more than its NIS 69 million profit in 2016.

A large part of Maytronics' growth in recent years has resulting from the company S and E robot series that it launched in 2015. Maytronic says that these robots "feature a number of technological and marketing advantages." As part of its measures for ensuring its continued growth, Maytronics completed construction of a new production site in the Dalton industrial zone in the Upper Galilee, which it said would "enable the company to respond rapidly to increases in demand for its products."

Maytronics' financial reports published in recent days show continuation of the company's positive trend, with revenue up 15% to NIS 242 million. Among other things, the company attributes the increase to "continued momentum in sales of the S line" and "very successful early buy sales in all of the company's territories" in addition to "the maintaining of a good level of sales through correct management of marketing strategy." In the bottom line, Maytronics' net profit jumped 26% to NIS 49 million.

Maytronics is not resting on its laurels; in its most recent annual financial statements, the company said that it was "currently focusing on development of an innovative line of robots that will be launched in the coming years." Maytronics' main goal is "maintaining a growth rate of over 10% a year in all of its business through the development and marketing of technologically innovative products." The company is trying to position itself as "the favorite brand in every distribution channel and for the end customer and as the favorite robot among robot cleaners in particular and pool cleaners in particular." Maytronics' growth led the company to upwardly revise its 2021 sales target to NIS 1 billion with a 16-18% operating profit margin.

Maytronics said, "The families of robots for the private market, which was launched in 2015, together with new robots for the public market, will bolster the demand for the company's products in the coming years also, owing to their technological advantages over the competitors' products." The company added that its financial results in past years "are clear evidence of this."

Maytronics estimates the number of swimming pools worldwide at 24 million, five million of which are cleaned by pool-cleaning robots. The company added, "In recent years, the market for cleaning robots for private pools, like other automated products for the home and yard environment, has been on a growing trend." At the same time, Maytronics notes, "Growing competition in the robot cleaners sector and the availability of products in all of the sales channels are pushing prices down to some extent and gradually reducing profit margins for the product."

Published by Globes [online], Israel business news - www.globes-online.com - on June 12, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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Maytronics factory Photo: Eyal Izhar
Maytronics factory Photo: Eyal Izhar
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