Transense Technologies (LON:TRT) – profits will quadruple this year
On Wednesday morning we will see this Oxfordshire-based developer of specialist wireless sensor systems, which are used to enable real-time data gathering and monitoring, reporting its interims to end December 2022.
I am expecting them to show clearly that very much bigger profits are on the way for the full year to end June 2023.
The £15m capitalised group’s products include - the patent-protected Surface Acoustic Wave (SAW) sensor technology, used to improve equipment power, performance, reliability and efficiency; iTrack, its Tyre Pressure Monitoring System, which is licensed to Bridgestone Corporation, the world's largest tyre producer, under a ten-year deal in June 2020; and a range of intelligent tyre monitoring equipment under the Translogik brand.
The group’s customer target sectors include aerospace, automotive (high performance and off-road) and complex machine control.
It seeks to win business by leveraging its excellence in innovation, know-how in commercialising technologies, industry partnerships and through exposure to global growth markets.
At the beginning of December last year, the group’s AGM Trading Update was very positive.
“For the first five months to end November the group noted that Trading continues to be profitable with positive operating cashflow. Net cash at 30 November was approximately £0.80m (30 June 2022: £1.06m), reflecting a further investment in share buybacks of £0.1m and a substantial increase in Translogik inventory to satisfy both existing and pipeline levels of demand.
Commercial development opportunities across all three segments of the company's business show good prospects for further growth as the financial year progresses.”
Analyst Ian Jermin, at brokers Allenby Capital, reckons that the group’s shares are undervalued and based upon forecast profits and cash flow are worth 150p each, compared to Friday night’s closing level of just 93p.
Jermin currently has estimates out for group revenues to rise 36% to £3.59m, while its adjusted pre-tax profits will more than quadruple to £1.17m (£0.27m) taking earnings up to 7.9p (5.4p) per share.
For the coming year his figures suggest a 27% increase in sales to £4.55m, with a 44% leap in profitability to £1.68m, worth 11.5p per share in earnings.
Impressively this year and next will see significant cash generation, leaving £1.76m net cash at end June and then up to £3.19m cash at the end of June 2024.
Based upon those forecasts from Allenby Capital, the group’s NOMAD and Broker, it is understandable why Jermin is calling the shares ‘undervalued’ after all they peaked at 122p in November 2021.
After the interims come out this Wednesday, I will expect to see the broker revise his estimates for this year and next.
In the meantime, I do feel that the group’s shares are a good ‘punt’ with big upside possibilities, perhaps back up to their previous peak.
(Profile 17.09.21 @ 102p set a Target Price of 127.5p)