Hy8 Nov 2011 13:32
Now could be “a great time to buy” shares in specialist antenna manufacturer Sarantel Group (LON:SLG) said XCAP Securities today. The small cap broker said that the firm looks good value since it is on the verge of becoming self funding and may also land volume orders from camera makers within the next six months.
XCAP noted that during the past year the company has won some high-margin orders for military applications; its patented ceramic antennas give accuracy to within a metre and obtain a fix more quickly than less-advanced systems. However, it is the opportunity among camera manufacturers that could be a “game changer” for Sarantel, said the broker.
In mid-October Sarantel reported that it had successfully completed field trials with a major Japanese camera manufacturer. GPS antennas installed in cameras can be used to record the geographical location of a photograph and Sarantel said that the small size and high performance of its GeoHelix GPS technology make it particularly well suited to this application. Trials of the company’s technology in Tokyo had impressed the unnamed camera manufacturer, Sartantel CEO David Wither told Proactive Investors at the time.
The near-term opportunity, according to XCAP, is in giving cameras accurate and fast geolocation, which would give the company exposure to the high-volume consumer electronics market. “We can see opportunities in smartphones, both for enhanced reality applications and, say, letting retailers offer special deals via text as people pass their doors,” said the broker. “Sarantel’s core patents were granted in 1994, but it has built up a strong portfolio since then which offers scope for royalties.”
Although Sarantel remains loss making for the moment, XCAP said that it believes the company will deliver sustained and growing profits in the coming years.
However, the broker described its 2012 forecasts as “extremely cautious”. This is for sales of £3.2 million, with operating profit on the EBITDA level being a loss of £1.2 million. The pre-tax loss is expected to come in at £1.5 million, which translates to a loss per share of 0.16 pence.
But applying a 2014 price-to-earnings rating, based on respected electronics peers, to XCAP’s “best guess” for Sarantel’s 2014 earnings led the broker to come up with a seven pence per share expected price. Despite this, the broker applied a discount to reach its current target price of 1.7 pence per share.
Sarantel’s share price in mid-afternoon trading today was up 16.3 per cent at 0.81 pence.
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