Synectics – cashed-up balance sheet, low market cap, progressive earnings growth, ahead of its Interims its shares at 317p, value 486p, look right to have.

20.06.2025

In three weeks, on Tuesday 8th July, Synectics (LON:SNX), which is a leader in advanced security and surveillance solutions, will be reporting its Interims Results to end-May.

I expect a positive statement and a good set of half-time results.

The £56m-capitalised group’s shares, currently 317p, have a broker’s discounted cashflow valuation of 486p per share.

It is profitable and growing its net cash balances, which could be currently around £8.7m.

It has the potential of securing loads of global business for its systems, which makes the shares extremely attractive, trading on only a 12.7 times current year price-to-earnings ratio.

The Business

The Sheffield-based group is a leader in advanced security and surveillance systems that help to protect people, property, communities, and assets around the world. 

It also has operations in Berlin, Macau, Singapore and in Wheat Ridge, Colorado.

The company’s expertise is in providing solutions for specific markets where security and surveillance are critical to operations.

Such markets include gaming, transport, public space, oil and gas, and critical infrastructure. 

Its experience and technical excellence, combined with long-standing customer relationships, provides fundamental differentiation from mainstream suppliers and makes the company a ‘stand-out’ in its field. 

One of its two segments - Synectic Systems, develops and delivers its proprietary, technology-led solutions to specialist markets globally - including gaming, oil and gas, public space, transport and critical infrastructure - through local systems integrators and channel partners.

Capabilities centre around a proprietary software platform, Synergy, that is tailored to the unique requirements of each customer, and specialist hardware for oil and gas markets built on its COEX camera range.

While the other segment - the Ocular side, delivers integrated solutions, service, and support directly to end-users in the UK and Ireland - principally within public space, transport, and national infrastructure - utilising a combination of the group's proprietary technology and third-party products.

Recent Wins

Recent wins across all key sectors continue to support the company's solid order book and encouraging sales traction.

In the energy sector, these wins include projects for new installations and refurbishments, notably within the floating liquefied natural gas and floating production storage and offloading markets.

The leisure and hospitality sector continues to see positive momentum with new customers secured, particularly in North America and the Far East. Additionally, sustained demand from established casino customers remains buoyant with both upgrades and repeat orders.

Further gains have been made across the group's critical infrastructure, public space, and transport sectors, including the award of new projects from local authority housing associations and the West Midlands Police.

Mid-May saw the group secure a £1.1m contract with Stagecoach, the UK’s largest bus and coach operator, for its On-Board Hub system, which simplifies the deployment of on-board surveillance technology, and then streamline operations, creating an integrated platform improving the operator and passenger experience.

Then on Wednesday 4th June the group announced that it had secured a five-year contract extension with a major casino operator in South-East Asia.

Trading Update

On Monday 9th June the group issued a Trading Update for the six months to end-May.

It noted that it had continued to see solid order intake and ongoing new business momentum across the group in its first half, with trading for the year to end-November comfortably in line with market expectations, which are for the current year revenue of £65.0m, with an adjusted pre-tax profit of £5.3m before share-based payments of around £0.5m.

The Equity

There are 17,794,439 shares in issue.

The larger holders include Whitehall Consolidated (25.72%), Downing Ventures (7.22%), Mchale Muldoon (3.29%), Sorbus Partners (3.28%), Stonehage Fleming Investment Management (2.70%), Hargreaves Lansdown Asset Management (1.78%), Aberdeen Investment Management (1.55%), KW Investment Management (1.34%), Herald Investment Management (0.87%) and Barclays Investment Solutions (0.82%).

Broker’s View

Analyst Rob Sanders, at Shore Capital Markets, has estimates out for the group’s year to end-November 2025 showing £65.0m (£55.8m) revenues, lifting its adjusted pre-tax profits to £5.3m (£4.7m), with earnings of 24.9p (21.6p) and paying a dividend of 6.5p (4.5p) per share.

For 2026 he looks for £70.5m sales, £6.0m profits, 28.4p earnings and a dividend per share of 8.0p.

He estimates that the year to end-November 2027 could show £75.1m revenues, £6.8m profits, with earnings leaping to 32.1p, easily covering a dividend of 10.0p per share.

In a recent note on the group, which stated a 486p DCF valuation per share, Sanders stated that:

“Even though the share price has performed well over the last 12 months or so, we believe that the valuation metrics in the outer years, suggest there is scope for further significant share price upside.”

My View

In the last year this group’s shares have been down to 161p, that was in early August 2024, they climbed to a 370p High in January this year, since when they dipped to 246p in April, before rising back to trade in the 310p to 330p price range.

It is still early days in the group’s development, even so I do see it winning a mass of new global business over the next couple of years.

I rate the group’s shares, now 317p, as a very worthy portfolio constituent for any investor looking for growth.

Accordingly, I now set a Target Price of 395p.

(Profile 20.06.25 @ 317p set a Target Price of 395p)