March 15, 2017

STRAX is a company specializing in mobile accessories and connected devices with access to 20,000 point-of-sales globally through telecom operators, traditional retailers and e-commerce players. Given the nature of small cap companies – they are small – they tend to be out of focus and thereby mispriced until someone puts them in the spotlight. We believe STRAX is both exciting and undervalued, and accordingly set our target price to SEK 7.5, supported by peer pricing, SOTP and DCF-valuation.

There is additional upside to our target price if STRAX is successful in adding more proprietary brands to the portfolio that can be pushed through to over 20,000 point-of-sales in the distributor network. The proprietary brands are well segmented in markets which will grow faster than the smartphone market. The primary growth driver will be continued high growth for headsets and protection products. In addition, the company has distributor agreements for ~30 of the larger OEM / 3rd party product manufacturers.

Gross margin expansion driven by favourable change in product mix
The gross margin on its own brand products is higher compared to OEM / third party products. We believe that STRAX can increase its own brand products as a percentage of total revenues from 65% in 2016 to >70% in a few years. The company can also benefit from demand for connected devices / Internet-of-things. STRAX is in constant dialogue with market researchers, trying to identify products that have mass market potential. Further, they can detect early trends and new products through their insight into upcoming product launches of their OEM / 3rd party partners.

Founded in 1995, STRAX is headquartered in Germany. The company offers several different brands that segments the mobile accessory market in a good way. The agile edge STRAX is specialized in understanding the market, especially from a design and packaging perspective. The company has a constant dialogue with market research firm to establish new trends or product categories that can benefit the company. Manufacturing is outsourced to specialists in China, India and Turkey.  Business segments The company offers a range of mobile accessories ranging from screen protectors, battery packs, protective cases, speakers etc. STRAX also offer products from ~30 OEM / third party product partners, including Samsung, Jabra and PanzerGlass.

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