IC article21 Feb 2014 13:22
For those who havent seen it...
I have also spotted another investment opportunity with clear potential to double in value in the next year, and potentially treble, and one where we can get in on the ground floor now. It is a stock market minnow, Aberdeen-based SeaEnergy
(SEA: 29p). The company is a small cap energy services business valued at £16m, a discount to net asset value of £18m even though net cash on the balance sheet is around £5.6m, or almost a third of the market capitalisation.
Bargain basement acquisition
Formerly known as Ramco Energy, the company sold off its interest in SeaEnergy Renewables Limited to Repsol and EDPR for a total of £38m in June 2011, which strengthened its balance sheet and provided a source of funding for new ventures. Subsequently, SeaEnergy acquired R2S, a profitable, cash generative and growing business, around 18 months ago. The initial consideration was £5m with a further earn-out payment of £500,000 made in March last year and another of £4.6m due next month if R2S achieves cash profits in excess of £2.5m in the 12-month trading period to end February 2014.
That’s significant because I understand from analysts at Edison Investment Research, who attended an investor day held by the company a couple of months back, that R2S is on course to achieve revenues of £5m last year, up 150 per cent on the £2m reported in 2012, and is on track to report cash profits of at least £2.5m. In other words, for a total acquisition price of only £10.1m, SeaEnergy now owns a business that not only makes over £2.5m of cash profits, but is growing at one heck of a pace.
This stellar growth rate is likely to be maintained in the future because R2S's core service - Visual Asset Management - is proving popular. The VAM technology involves taking 360 degree spherical photographs of locations and then building up three-dimensional (3D) models. Data can then be embedded, indexed and managed. R2S initially provided these services to Police Forces and Courts across the UK, to model crime scenes and to index and manage associated evidential data. Fingerprints, footprints, DNA and other forensic evidence are all embedded within recorded scenes, whilst video footage, forensic photographs, 3D models, animations, plans, audio files and websites can be added and updated as a court case progresses. The meticulous and visual nature of R2S helps anyone connected with a case to be quickly and continuously informed without the need for direct access to the scene.
But it is the oil and gas sector where the real profit potential of the technology is taking off as VAM enables oil rig operators to keep a visual record of all key parts of an oil rig, monitor its condition and any changes to the fabric, with a view to carrying out the required maintenance. And the best part is that customers using the technology
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