Companies: DTK   

After declaring 2007 was ‘the best year ever’, Israeli electronic tagging specialist Dmatek has made a ‘strong start’ to 2008 as elderly care and sex-offender monitoring gain industry traction.

‘I think the market has turned the corner,’ says operations director Yoav Reisman. ‘Whereas a few years ago tagging was only established in the US, now it is an accepted method throughout Western Europe. We’re going to the next stage.’

Dmatek's traditional business has been the tagging of offenders, but this has widened into in-prison monitoring and its first non-law-enforcement usage, the monitoring of the elderly in care homes. 'Elderly care' made up 14% of sales in 2007 and is well placed for further growth, with law enforcement’s share being boosted by last year’s acquisition of a US-based GPS-monitoring rival from $22.5m (£11.3m) to $37.9m.

Visibility is improving too as the company moves increasingly to a leasing model, with recurring revenues making up 61% of last year's sales, up from 28% in 2006. Profit margins were one blot on last year’s copybook, decreasing from 66% to 62%, but Reisman says operational performance improvement is an aim.

The next stage for the company sees tagging being extended to new groups of people, including sex-offenders and those on restraining or exclusion orders. Dmatek has already begun work on the latter in Spain and legislative fervour is building in the US for sex-offender monitoring, with the company well poised to benefit.

Boasting high recurring revenues and forecast to make 2008 profits of $6.3m and 23.5c (11.8p) of earnings, the shares in this growing player in a dynamic niche market are attractively valued. Buy.

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Dmatek	LSE	£25.61m	117.50p	-1.00p
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