Follow-ups on SRT Marine Systems and Filtronic
In this start of the week article Mark Watson-Mitchell catches up with the ‘Two More Winners’ that he featured a month ago.
SRT Marine Systems (LON:SRT) – broker has Price Objective of 100p, almost twice the current price
Yesterday the Bath-based developer and supplier of maritime domain awareness solutions delivered its results for the year to end March – they were totally up to expectations.
Revenues were up 265% from £8.17m to £30.51m.
However, boss Simon Tucker commented that:
"Our many years of technology, product and market investments are now starting to show in our financial results.
Our transceivers division grew by 60% and our systems division is back on track following a pause in government business during Covid.
We go into the new year with an expanded product range and distribution network, a forward contract order book of £160m and a new prospects pipeline of system contracts worth approximately £1.4bn.
This position reflects the early strategic decisions made to position SRT at the centre of these substantial global markets."
SRT is a global company which develops and provides integrated maritime surveillance, monitoring, management and safety systems used by coast guards, fishery authorities, infrastructure and vessel owners for the purposes of managing and controlling their maritime domain.
Applications include security, safety, search and rescue, law enforcement, fisheries management, illegal fishing detection and environment monitoring.
The group has a very impressive forward contract order book of £160m, as well as a pipeline of new systems contract prospects of some £1.4bn.
It recently raised £3.95m of fresh working capital @ 50p a share, with a view to accelerate its growth in both its systems and transceivers divisions.
Analysts Kimberley Carstens and Michael Hill at the company’s broker, finnCap, are very positive about the group’s prospects, setting a Price Objective of 100p on its shares, which were 55p upon the results, after having hit 56p the day before.
The brokers are estimating revenues to rise to £70.9m in this current year to end March 2024, turning it from an adjusted pre-tax loss of £0.2m up to a very healthy £7.4m, taking its earnings up to 3.8p (0.3p) per share in the process.
For the 2025 year they see £104.8m of sales, generating £11.8m of profits and 6.1p per share of earnings.
With its shares closing on Friday night at 55.5p the group is capitalised at nearly £108m.
My opinion on the company and its prospects remains unchanged, its shares, which have been up to 69p as recently as early June, will soon reflect its growth potential and they look cheap to me.
Expect contract news soon to be possible with the group’s AGM Trading Update on Tuesday 19th September.
(Profile 14.09.20 @ 39.5p set a Target Price of 50p*)
Filtronic (LON:FTC) – finals due on Tuesday morning should confirm better prospects
On Tuesday morning, the designer and manufacturer of products for the aerospace, defence, telecoms infrastructure and critical communications markets, will be announcing its final results for the year to end May.
We already know that they will not be looking too good due to component shortages causing supply chain constraints.
However, the Sedgefield-based group has reported that those issues have eased considerably.
Better still, the £38m capitalised group has been winning more business – the latest contract being announced just a week ago, for the European Space Agency.
The £3.2m order, for the ESA Space Deployment of 5G/6G and Sustainable Connectivity programme, will concern the group developing a series of advanced mmWave products to enable broadband connectivity from low earth orbit satellites to receiving ground stations.
Upon the contract being announced CEO Richard Gibbs stated that:
"We are delighted to work with ESA on this important development at the leading edge of LEO space communications.
The LEO space market is developing fast and the need for higher bandwidth links between satellites and the ground station is inevitable.
Working with ESA to develop products at multiple frequencies, that can be supplied as part of next-generation LEO constellations, is both timely and strategically important for Filtronic.”
Filtronic designs, develops, manufactures, and sells advanced radio frequency communications equipment for the telecommunications infrastructure, aerospace and defence, critical communications, and space market sectors in the UK, Europe, the Americas, and internationally. It also provides contract design and microelectronic manufacturing, RF design and testing, and process engineering services.
At its brokers, finnCap, its two analysts Michael Hill and Kimberley Carstens note that the ESA contract is expected to start immediately, with the contract value split between the current year and next (FY24 and FY25): development of design concepts and prototypes is expected in FY24; and final delivery by 31 March 2025 (FY25).
They state that more broadly, this strategically important contract win formalises the relationship with ESA and enables Filtronic to develop products at multiple frequencies that can be supplied as part of the next-generation LEO constellations.
The brokers consider that such positive referenceability is crucial in the early stages as the company engages with leading players in the market in the context of a booming satellite industry.
For the current year to end May 2024 they estimate revenues rising from £16.3m est to £20.5m, lifting adjusted pre-tax profits from £0.1m est to £0.8m and jacking earnings up to 0.3p (nil est).
They have a 20p Price Objective on the shares, which closed on Friday night at 17.75p after hitting 18.5p.
That is 22.5% up in the last month, clearly showing a good market tailwind which suggest that the shares are heading a great deal higher yet, so hold very tight whilst we see what Tuesday’s results statement looks like and just how positive it sounds.
(Profile 04.02.22 @ 11.6p set a Target Price of 14.5p*)
(Asterisks * denote that Target Prices have been achieved since Profile publication)