$MAGS ($5.89) - Shares of MAGS have been consistently hitting 52 week highs, rising by 10.5% on Friday, and are marked up to over $6 in pre-market trading this morning. Security and defense stocks have been getting a boost since Trump’s victory.
MAGS develops, manufactures, markets, and sells computerized security systems used to automatically detect and deter human intrusion primarily in Israel, North America, Europe, South and Latin America, and Africa. MAGS connection to Trump has to do with his goal to build a “wall” or “fence” between the Mexico - U.S. border. One of MAGS area of focus is perimeter security:
The company offers perimeter security systems that enable customers to monitor, limit, and control access by unauthorized personnel to specific regions or areas. Its perimeter security systems include a hybrid perimeter intrusion detection system with physical barrier; fence mounted vibration detection systems; detection grids, gates, and innocent looking fences to protect water passages, VIP residences, and other outdoor applications; and buried cable sensors, electrical field disturbance sensors, and microwave sensors.
MAGS has constructed barriers along the Egyptian and Jordanian borders and has contracts in Kenya, Somalia and other countries.
Comments from CEO Saar Koursh on Trump Victory:
“Trump’s victory brings great opportunities for anyone in the security and defense market,” Magal CEO Saar Koursh told The Jerusalem Post in an interview. “I’m not taking a political position here, I’m merely noting as a CEO of a security company: When you have an administration that is more security-oriented and will allocate budgets to that end, many in the market including us will enjoy that.”
“But Koursh wanted to two things clear, that Magal is not a fence company, and that the firm does more to protect the perimeters of strategic assets than it does borders. “We are not actually a fence company, we are a tech company. We don’t make fences, we make fences smart with tech solutions. Our advantage is that as the leading company in this field we have the biggest portfolio of solutions, he told the Post.”
We will be on the hunt for other stocks that may benefit from the U.S. potential efforts to protect its borders. As always, in the end, the key will to find attractive plays, beyond the hype.
Investors should note that MAGS is slated to report earnings on November 29, 2016. We have been tracking MAGS for some time and have been unimpressed with the Company’s ability to grow the top and bottom lines. The Company has a history of reporting sporadic results. The the stock is trading at high valuation multiples.
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EV/S = 1.2
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EV/EBITDA = 18.0
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P/E = 83.6
We are in the process of determining the breadth of financial benefit that perimeter security contract wins, specifically in the U.S., will have on MAGS.
Here is a Bloomberg article from early August discussing MAGS as a possible benefactor of a Trump victory.
