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The current share price is now crazily cheap imho after recent falls given all we know about PEG's trading.
Volumes have been tiny, and the stock is vulnerable to small selling given its size and lack of liquidity - and with it still being under the radar of most investors.
A reminder of the outlook from only a month ago:
"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."
I saw that, I probably wont be able to get there but a colleague of mine is going so I've asked him to update me on what they say.
I notice that PEG are presenting at Mello London on November 26th/27th:
Http://melloevents.com/mello-london/
Good to see PEG being proactive - hopefully this will spread the word further.
Bombardier today win a 198 million euro contract for Siemens to provide new carriages etc to Deutsche Bahn - hopefully more work to come for PEG:
Https://www.investegate.co.uk/bombardier-transportation/gnw/bombardier-receives-order-as-siemens--partner-a---/20181004110000H7701/
...and another 25k buy causes another move up.
Good to see an early £6k buy today causing an immediate tick up.
Hopefully there's a lack of stock around. It wouldn't take much buying interest to get the share price up to or close to WH Ireland's 34p valuation given PEG's relatively small free float.
62% of the shares are held by the top 10 shareholders, including Miton Microcap, Charwell Investments, Downing Active, Chelverton Growth and well-known small-cap specialist Thomas Charlton.
WH Ireland have retained their 34p valuation for PEG, and their forecasts of 2p EPS rising to 2.4p EPS next year.
I note they say that this is "For the time being", with those forecasts "well underpinned by the strong order coverage".
Which suggests that we may get upgrades if all goes well - and PEG are cheap enough on a P/E of 10.4, let alone with any upgrades:
"Interim results illustrate a good performance and strong visibility
Petards supplies advanced security and surveillance systems to the Rail, Defence
and Traffic Technology markets. This morning, the Group has released H1 2018A
results, which illustrate a good performance in the period, including strong orders
being delivered in Defence and the acquisition of RTS in May.
Looking forward, the Group’s order book has increased by £2m to £20m since the beginning of the year, including order coverage for H2 2018E of over £9.5m and approaching £8.0m for FY2019E. Following the results and with this excellent visibility, we have left our forecasts unchanged. At current levels, the shares trade on a lowly 11.0x FY 2019E PER and 5.1x EV/EBITDA. We continue to see fair value at 34p."
A few relevant statistics for PEG. Enterprise value is £13.5m and trailing EV/Ebitda ratio is just 7.6. Assuming revenues of £10.5m for H2 (current order book of just under £10m) gives full year revenues of £20m and average revenue growth in the last 3 years of 15.8% and average operating profit growth of 10%, giving a PEG ratio of just 1.2. Cheap as chips.
Very pleasing H1 results today:
- adjusted profits up 17% to £600k, so PEG's confidence that full year forecasts of around £1.2m looks well-founded
- there's a good chance forecasts pf 2p-215p EPS will be beaten given the very strong H2 order book
- revenues are up 21%, even despite the new IFRS15 revenue recognition rules reducing Eyetrain revenues
- all 3 divisions are looking strong and growing nicely
- the new acquisition is going well and winning contracts
- recurring income is also looking good
- there's a strong hint of further retrofit Eyetrain contracts to come
- there was excellent cash generation of almost £1m from operating activities, and PEG have a £1m cash pile to play with
And the outlook is very good indeed:
"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."
I understand that the results shouldn't be too long now.
Hopefully the interims will be on Monday morning given last year's numbers were issued on 12th September, which is usually a promising sign.
It's worth noting that new EU rules coming into force soon will open up Europe's railways to increased competition - and therefore improvements in and expansion of infrastructure, rolling stock etc. Which should be beneficial to PEG given its high-level contracts with Siemens, Alstom, Hitachi, Bombardier etc:
Https://www.telegraph.co.uk/business/2018/09/13/aberdeen-standard-makes-multibillion-pound-foray-railways/
"Fund management titan Aberdeen Standard has launched a multibillion-pound expansion into Europe’s railways, with plans to buy fleets of trains on the Continent and compete with the state-backed operators that proliferate the market.
The FTSE 100 company has entered into a joint venture with Rock Rail, a specialist owner of rolling stock such as trains, carriages and engines.
The joint venture is a bid to take advantage of the opening up of Europe’s railways. EU rules coming into effect next year will see competitive tendering processes made compulsory, pitting private companies against the state-backed incumbents."
Nice 50,000 share buy at 26p has caused today's tick up - good to see the bid price up to 25p now.
WH Ireland also reiterate their 34p fair value for PEG, after today's contract win.
They forecast 2p EPS rising to 2.4p EPS.
Needs a lot of good news to get this share price moving. Interim results are due this week, hopefully that will do the trick. Hoping for lower working capital, improved cashflow and a share buyback :-) One can but dream.
Hybridan today reiterate their forecasts of 2.15p EPS rising to 2.56p EPS.
They say PEG "count the majority of the world’s largest rolling stock suppliers as its customers. This time round, the Company has landed another meaningful order from Siemens on their contract for the Turkish State Railway."
And "Petards continues to benefit from a robust long-term order book and we believe that in the context of growing infrastructure investment, Petards’ management team has the commercial and strategic know how to further accelerate revenue and earnings growth."
Indeed but not sure why it hasn't registered on this page.
Another large contract win, this time for £1.1m, securing further revenues for 2019 and 2020.
Great to see the continuing business for Siemens, but also that it's overseas business for the Turkish State Railway....imagine the impact when PEG continue to win further business around the world:
Https://www.investegate.co.uk/petards-group-plc--peg-/rns/contract-award/201809120700034716A/
A reminder that Hybridan's latest forecasts give rise to a forward P/E of just 9.3:
this year - 2.15p EPS, with £1.2m net cash
next year - 2.56p EPS, with £2.4m net cash
Interesting detail here about the recent acquisition - lots of recurring income for example:
Https://www.insidermedia.com/insider/southeast/consultancy-expands-on-role-in-petards-deal
"Consultancy expands on role in Petards deal
6 Sep 2018
A Southampton-based consultancy has detailed its involvement in an acquisition made by Petards Group, an AIM-quoted developer of advanced security and surveillance systems.
Jamie Lane, based in transaction services at Smith & Williamson, which provides accountancy, investment and tax advisory services, was appointed by Petards followed a tender for due diligence.
RTS Solutions (UK) and its parent company RTS Solutions (Holdings) (together RTS), a specialist transportation software engineering company, joined Petards following Smith & Williamson's review of the financial aspects of the target business.
Lane, who works at Smith & Williamson's South Coast office, said: "Following a competitive tender, our remit was to look at RTS' financial performance and its assets and any liabilities, providing proactive support to Petards through to completion.
"RTS figures showed it was profitable and debt-free, with a history of excellent cash generation. More than half of revenues related to recurring software licences, maintenance and support contracts, which provided further trading confidence.
"Speaking generally, it is essential in any due diligence work that nothing falls through the cracks, so the potential acquirer is confident of the target’s future prospects and past performance."
Leeds-based RTS provides web-based safety-critical applications in real time to customers involved in operational, engineering and maintenance programmes. Its principal customers are currently Network Rail, which owns and operates the railway infrastructure in England, Wales and Scotland, and Network Rail’s major contractors.
Petards' eyeTrain provides digital on-train surveillance and helps maximise safety and performance for train-operating companies and train builders."
Good to see four small buys having an upwards effect now after an early markdown on just £2k of sells!
A little volume goes a long way with this stock....it's crazily cheap imho.
I believe that:
(1) PEG may well beat 2.15p EPS forecasts this year given the very strong start to the year and the new contract wins. Even if they "only" meet forecasts then .....
(2) PEG are extremely good value given 2.56p EPS forecast next year, with decent visibility for that number already
(3) the excellent potential for retrofit now makes PEG even more attractive
(4) and the sound Balance Sheet may well enable further acquisitions as already hinted at
Hybridan have issued an update note following the latest large contract win from Bombardier.
They've retained for the moment their 40p target (almost 70% upside), and 2.15p and 2.56p EPS forecasts, with £1.23m net cash rising to £2.37m.
Interestingly, they highlight that this contract "highlights opportunities beyond the
awards of infrastructure expansion projects and rail franchise awards."
This is because this contract is for rail retrofit rather than the usual new train builds, "bringing carriages up to date with best in class technology". They say:
"We believe that the drive for efficiency and increased levels of automation across the rail network presents Petards with an opportunity for further retrofit opportunities where no ASDO system is fitted."
A large contract win just announced - another £2.7m for Bombardier, securing further revenues into 2019 and 2020.
And it's not just for CCTV, but for PEG's door opening and passenger counting systems too.
Hopefully this will lead to upgrades to the existing 2.15p and 2.56p EPS forecasts:
Https://www.investegate.co.uk/petards-group-plc--peg-/rns/contract-win/201808160700089533X/
Good things come to those who wait!!
Forgot to mention Hybridan's current forecasts, which are:
this year : 2.15p EPS
next year : 2.56p EPS
i.e a P/E of 11.4 dropping to just 9.6.
They also forecast £1.23m net cash at the end of this year, rising to £2,37m next year (against a £14m m/cap).
So the ex-cash P/E drops even further, and there's also the likelihood of another acquisition all or partly from cash.
Hybridan have issued a new note following last week's contract win.
They suggest a 40p target price, and have interesting comments on (1) another large contract win being likely, (2) the potential for further acquisitions and (3) the potential to supply more on-board technology:
Extracts:
"This is another deal for the Aventra platform and we believe Petards is well placed to land another potential meaningful order. Other rolling stock contracts currently out for tender include South Eastern (800 vehicles), West Cost Partnership (300 Vehicles), and Hi Speed 2 (800+ Vehicles).
The recent RTS acquisition diversifies the Group into infrastructure technology, but we believe Petards also has the reputation and customer base to supply more on-board technology, and we see an opportunity to broaden the product portfolio both organically and by further acquisition.
We believe that Petards merits a re-rating to at least a mid-teen PE multiple. At 40p (68% upside from here), the shares are on a 16x FY2019E PE multiple. Petards continues to benefit from a robust long-term order book and we believe that in the context of growing infrastructure investment, Petards’ management team has the commercial and strategic know how to further accelerate revenue and earnings growth."