Brokers14 Jun 2013 11:53
WH Ireland estimates
Recent performance has been impressive, with revenue rocketing 62 per cent in the year to March 2013, while low fixed costs meant a near seven-fold increase in pre-tax profit. Net cash will have ballooned since the year-end given late shipments left £3.4m of receivables on the books. However, talk that trading would be weighted toward the second half of the current year took the wind out of SRT's shares' sails and the recession has slowed retrofit sales to the leisure market. But analysts at Edison Research reckon SRT will hit sales targets even if less than 5 per cent of the existing mandates are delivered.
That implies current earnings forecasts are hugely conservative and deliveries against both existing mandates and new mandate awards will drive upgrades. Even now, SRT's shares are valued at just 12 times forward earnings compared with an average of 15 times for other technology hardware stocks, based on Edison forecasts.
Crucially, last month's deal with a Canadian AIS satellite network opens up a route to significant recurring revenues. It's a big technical hurdle, but it will eventually allow SRT to sell bundled data on vessels currently out of AIS's 50-mile range. SRT's electronic markers for buoys that measure tide, currents and other data also have massive long-term potential.
Share tip summary
SRT's shares are nudging the top of their 15-month range but, given that deliveries against both existing mandates and new mandate awards are only a matter of time, they look set to sail through technical resistance at 30p and way beyond. Buy
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