Ryan Mee, CEO of Fulcrum Metals, reviews FY23 and progress on the Gold Tailings Hub in Canada. Watch the video here.
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- "big upside potential" with 2.65p EPS forecast this year:
Https://masterinvestor.co.uk/equities/petards-group-this-minnow-has-big-upside-potential/
"The services offered by the Defence part of the group are based upon leading innovation in complex, technology focused solutions and software for land, sea and air. It works for and with national and international military organisations, prime contractors and highly accomplished third parties to design and build ruggedised electronic solutions for a wide range of applications and purposes.
It creates specialised military and commercial communications systems. It provides electronic defensive countermeasure systems for fitment to rotary and fixed wing aircraft, threat simulation systems and mobile radios predominantly for the UK Ministry of Defence.
This division boasts an impressive list of clients, including the Royal Air Force, the Army, the Royal Navy, the Ministry of Defence, BAE Systems, Leonardo and Stadler, NATO Oman, amongst many others.
For the whole of this group I am impressed by its list of clients and I understand that its order book, for this current year and next, is already at substantial levels. That workload will have been boosted, no doubt, by its latest £1.5m plus contract from Bombardier Transportation, announced late last week. For that company Petards is to fit its eyeTrain video and data solution in to its Aventra trains – adding further to its installed base with Bombardier.
This group, valued at a mere £12.6m, has 57.5m shares in issue of which some 74% are in firm hands. Apart from the Board holdings, fund investors include Downing Active with 6.3%, Miton UK Microcap with 4.6%, and Chelverton with 3.5% of the equity.
I consider that they are all on to a winner with Petards. Although it is in a fairly competitive and international market place, it does seem to offer what its clients are seeking and, as its order books increase, I see its profits moving forward at a faster rate.
For the current year brokers Hybridan are looking for £19.4m of revenue and pre-tax profits of £1.52m, worth 2.65p per share in earnings. At only 22p that puts the shares of Petards Group out on a current year 8.3 times rating, whereas I would rate them out on at least 15 times, which would be about 40p.
In the technology sector, these shares are seriously undervalued and due for a re-rating."
- "big upside potential" with 2.65p EPS forecast this year:
Https://masterinvestor.co.uk/equities/petards-group-this-minnow-has-big-upside-potential/
"Petards Group – this minnow has big upside potential
By Mark Watson-Mitchell 18 April 2019
Despite its size this group is a global leader in the provision of security, surveillance and communication technology solutions. In the technology sector, these shares are seriously undervalued and due a re-rating.
When Petards Group (LON:PEG) announced their 2018 finals last Thursday, the company’s shares fell back from 25p to 22p in reaction. On the face of it, from what I can see, the shares of this advanced technology company are going the wrong way; however, it does give investors the opportunity to pick some up a lot cheaper than previously offered.
Established some 60 years ago, Petards Group was listed on AIM way back in 1997.
On the Rail side, which makes up about 60% of group sales, it puts together digital on-train surveillance subsystems for fitment to new build or retrofitted to existing rolling stock. These video and sensor systems include applications for Driver Controlled Operation (DCO); for Automatic Selective Door Operation (ASDO); and for condition monitoring, saloon car CCTV, drivers view cameras and automatic passenger counting systems – all of which are marketed under the ‘eyeTrain’ brand.
Petards’ solution systems have been designed over the years, in close collaboration with both the train operators and the train builders. They help to maximise safety and performance, at times when passenger numbers are ever increasing.
Rail clients include: Bombardier, Stadler, Siemens, Hitachi, Govia Thameslink, Southern, Northern, South Eastern, Gatwick Express, KiwiRail, Virgin Trains, WM Trains, Transport for London, Network Rail, South Western, LNER, C2C, GWR, ScotRail and Porterbrook.
The Traffic division of the group centres especially around its Automatic Number Plate Recognition (ANPR) camera-based surveillance technology. It is used to monitor any situation involving traffic, from police speed enforcement solutions to public toll roads and digital signage for commercial premises.
Its ‘ProVida’ system overlays detailed information regarding incidents and crimes, such as dangerous driving and speeding, onto captured video footage, which can later be used as evidence in a court of law.
ProVida is a Visual Average Speed Computer (VASCAR) system. It is a standalone, enabling it to be used without a full in-car computer system and it can be used when moving or stationary, with the target vehicle travelling in the same direction, in front or behind the surveillance vehicle.
These systems are sold to UK and overseas law enforcement agencies and UK based commercial customers, such as Cheshire Police, the Home Office, Thames Valley Police, Hampshire Constabulary,"
With 2.4p EPS forecast this year - and a £1m cash pile - a 23.5p share price looks pretty cheap to me.
Especially with £14m of this year's forecast £19.4m sales already secured by order books (including £1m from the new £1.5m contract win) - up from £12m at the same point last year.
R&D expenditure is stated to be "much lower in 2019", which will help cash flows and thereby the potential for further acquisitions.
The results will be H2-weighted, but the markets is used to this - and PEG is in a better situation to most companies because they've already secured most of the necessary orders for the year.
Given the potential for new contract RNS's, and the confidence in the outlook as below, I remain optimistic, especially at this current share price:
"The Group has a strong pipeline of new contracts under negotiation which it is anticipated will add to the orders for delivery in the second half of 2019 and for 2020. These together with the Group's strong market position provides the board with confidence in its prospects for the year ahead".
WH Ireland retain their forecast of 2.4p EPS this year and their 34p price target:
"Significant investment has been made in the next generation of its eyeTrain software solutions in recent years, which should further enhance Petards’ position in the rail market where it already works with five of the six key train builders.
Following the results, we leave our forecasts unchanged, which should be well underpinned by the strong order coverage and pipeline being seen (WHI est. FY 2019E PBT £1.5m, EPS 2.4p; FY 2020E PBT £1.6m, EPS 2.5p).
The shares currently trade on a FY 2019E PER of 10.6x and EV/EBITDA of 5.5x. Given the level of secured work, in addition to the pipeline of opportunities, we believe that these multiples continue to undervalue the business. Our estimate of fair value remains unchanged at 34p, which would imply a FY 2019E PER multiple of 14x."
Down 1.5p today on just £20k of trades, presumably one or two of the usual small sellers on results. Crazy, nut a result of PEG's microcap status and illiquidity.
Might have been better to have announced the new £1.5m contract win tomorrow rather than today, losing the impact in conjunction with the results.
A pretty good set of results, with £2.06m EBITDA up from £1.62m, and reported PBT up to £1.13m from the core £0.71m. Revenues at almost £20m were up 27%.
Most importantly, order books are up to £19m and 2019 revenues already have £13m in the bag.
Plus there's been another £1.5m Bombardier contract win announced today - and this adds to that £19m order book at the end of 2018.
PEG have almost £1m net cash despite the RTS acquisition and product development expenditure not expected to recur in 2019.
Order books are up even despite Defence having a more difficult time this year, but QRO appears to be thriving and expanding, the proof being the move to a new home.
And:
"The Group has a strong pipeline of new contracts under negotiation which it is anticipated will add to the orders for delivery in the second half of 2019 and for 2020. These together with the Group's strong market position provides the board with confidence in its prospects for the year ahead."
“The new contract, which is worth in excess of £1.5 million is for the supply of Petards eyeTrain systems to be fitted to BOMBARDIER AVENTRATM Electrical Multiple Unit (EMU) trains to be built by Bombardier. Activities will commence immediately with the first equipment deliveries starting in mid 2019 and it is expected that the deliveries will be completed in 2020.”
Have left results rns for Rivaldo!
GLA
Results are confirmed for Wednesday 10th April per today's RNS:
Https://www.investegate.co.uk/petards-group-plc--peg-/rns/notice-of-results/201903250700138055T/
Given the lack of further comment we can be pretty confident the results will be nicely in line with expectations of 2.02p EPS and a £1.4m cash pile.
Forecasts for this year remain at consensus 2.46p EPS.
They've been 14th March the last two years so next week is likely.
No trading update, so imo we can be pretty confident the results will be nicely in line with expectations of 2.02p EPS and a £1.4m cash pile.
Assuming forecasts for this year remain unchanged at consensus 2.46p EPS then hopefully we can expect a move up to 30p-35p, and if the outlook is very positive then perhaps the upper end of that range.
The interim outlook was certainly bullish:
"Outlook
The Group continues to benefit from a good balance sheet and a strong forward order book of £20 million which has been further enhanced with the recently announced awards of three contracts totalling over £6.5 million from Bombardier and Siemens.
The Board is also pleased with the performance of its more recent acquisitions, QRO and RTS, and continues to review opportunities for other acquisitions.
With the June 2018 order book containing revenues of approaching £10 million for the second half of 2018 and almost £8 million for 2019, the Board remains confident in the future prospects for the Group."
FYI, Techinvest summarised as follows in their recent New Buy tip:
"For the current year (i.e now last year to 31/12/18) broker WH Ireland forecasts pre-tax profit of £1.2m and earnings per share of 2.0p. These figures rise to £1.5m and 2.4p respectively for 2019. A prospective P/E of 10.4 for a little over a year out looks unduly low and we feel that further growth from the company in the second half of the current year could easily trigger an upward re-rating of the shares. WH Ireland's estimate of fair value for the stock is 34p.
Continue to buy for exposure to Petard's strong growth dynamics and secure base of core customers."
Yes, I am hoping for a trading update soon as well. This being AIM that might explain the sudden uptick ;-)
Good news coming!
...and up again nicely today. Apparently Techinvest magazine added 30 k@ 26.5p to their portfolio on 31st December having made PEG a New Buy in November.
Last year's year end statement was on 12th January - not long now. Given the interim outlook, it should be good:
"The Group continues to benefit from a good balance sheet and a strong forward order book of £20 million which has been further enhanced with the recently announced award of three contracts totalling over £6.5 million from Bombardier and Siemens."
"The Board is also pleased with the performance of its more recent acquisitions, QRO and RTS, and continues to review other acquisition opportunities."
"With the June 2018 order book containing revenues of approaching £10 million for the second half of 2018 and almost £8 million for 2019, the Board remains confident in the future prospects for the Group."
Nice £20,000 buy at 28p just now has jump-started the price.
Good to see PEG featured as a major riser and holding in December's newsletter just out of the Downing UK Microcap Growth Fund:
"Petards made no material announcements during the period. We believe it is in a strong position, current orders for H2 2018 are in excess of £9.5 million and almost £8 million in orders are scheduled for 2019. EyeTrain orders of over £6.5 million add to coverage for 2019 and beyond."
Some rough notes and quotes from the Mello presentation:
- Paul Negus (Group Development director) has an impressive track record and has previously built and sold another business to a global leader
- "exciting future ahead"
- the Defence division has the MOD, BAE, NATO and Leonardo as customers
- PEG are aiming to "build new client relationships globally"
- the ASDO new product (automatic door opening system) has "significant interest" and "a number of open bids in the pipeline"
- looking at further acquisitions after those of QRO and RTS
- "strong pipeline", high levels of interest in current tenders and bids
- now entering "production phase" for rail customers, after sinking costs into the initial R&D and engineering phase
- the new GEN6 Eyetrain is for retrofit as well as new build
- PEG have almost a UK monopoly in rail, with customers including Siemens (Desiro trains), Bombardier (Aventra), Stadler (Flirt), Hitachi etc
- huge barriers to entry given high cost of change of suppliers
- 6,500 new rolling stock carriages to be awarded in 2019/20. PEG's offering is for £3,500-£15,000 per carriage. Work it out!
- Siemens are expanding their Leeds facility and have been awarded 3,000 London Underground vehicles for £1.5 billion cost. PEG are the ONLY UK manufacturer of this new on-train technology
- the industry shift to digital is helping PEG
- in the past there have been Engineering overruns. PEG are now entering the lucrative supply and maintenance stage
- PEG have European market leadership due to the UK's CCTV technology, as Europe have a long way to catch up
- aiming to make Defence integral to customers as with Rail
- Traffic had £2m new orders in H1
.... Fundamentals look sound, rivaldo, agreed ... but time & again this stock reacts to 'sudden interest'. One problem is, of course, poor marketability ( a 2p spread does no favours)
Likely to close off the best (27/9) & go quiet again shortly.... buy/add on a flat day and not when in the news/spotlight....
Looking good now - hopefully on the way back to the all-time highs of 38p or so.
I saw PEG present at Mello London - imo they were excellent, and I know of others who were similarly impressed. The main presentation was done by Paul Negus, the Business Development director, and he was particularly good.
The prospects for rail in particular look huge.
PEG were one of the big hits of the entire conference AFAICS, with everyone coming away extremely positive. Apparently Judith from Downing Microcap IT gave PEG the thumbs-up too.
Another poster elsewhere has reported:
"I was at today’s Mello presentation and a lot of ticks went in my boxes, and I was not alone.
A very competent forward-looking presentation majoring on the Rail sector where they seem to hold a strong niche position - they addressed the margin issue head-on and were quite convincing that they are now intent on monetising their IP."
Great to see PEG spreading the word. Hopefully this means there's a good story to tell which will excite investors given the encouraging numbers and prospects.
PEG remain on a single-figure P/E for next year based on 2.56p EPS forecast by Hybridan:
Http://melloevents.com/mello-london/
I note that Techinvest's write-up is an initial Buy recommendation - they "plan to write about the company in more detail in next month's issue".
Which should generate more interest.
Bombardier have today won another €112 million rail contract - hopefully more work to come here for PEG given their relationship with Bombardier (and cheers rdsh56!):
Https://www.investegate.co.uk/bombardier-transportation/gnw/akiem-and-bombardier-sign-contracts-to-supply-a-total-of-33-traxx-locomotives/20181109100749H8482/
Don't worry you're not talking to yourself even if it seems like it.
30k just reported bought at 24.41p, well above the 24p offer price. Someone's keen.
The share price is starting to move up nicely (as it should, being so undervalued, imho anyway!).
Apparently PEG has just been tipped in Techinvest, and a poster elsewhere has commented as follows:
"Techinvest new buy @21.5p in latest issue. I liked what I read and took a position today. In very good company here. Clearly an overhang at the moment as I had no problems buying in size. A p/e of 8.7 for next year and good client base."
Nice to see almost 100,000 shares bought at the open and causing a nice uptick - hopefully clearing any overhang.