by growth company investor25 Aug 2010 13:24
There is value to be unlocked within the small-cap security sector, where stirrings at two particular AIM players excite
Providing electronic and physical security systems focused on personal security and asset safety, Newmark Security, chaired by veteran Maurice Dwek, co-founder of Dwek, London-listed in the 1970s, is a niche business on the verge of nice growth.
Through asset protection arm Safetell, Newmark supplies rising security screens that protect bank and building society staff, while its electronic operation, Grosvenor, provides access control and security management.
Annual numbers to April showed sales lifted 6.5 per cent to £13.8 million and profits increased from just under £1.5 million to around £1.7 million, with an 18 per cent sales surge within asset protection more than making up for weakness in the electronic arm.
What makes Newmark anything but a security steady-eddy is its entry, through the acquisition of 60 per cent of ATM, into the Cash In Transit (CIT) deliveries and cash machine protection market. Intriguingly, ATM has developed a product, in conjunction with CIT delivery giant Loomis, that beats the existing method, using ink to stain banknotes, out of sight.
Application of a glue causes a chemical reaction when it comes into contact with the notes, degrading the cash and rendering it useless. Finance director Brian Beecraft assures me that ‘the market for it is enormous’ and believes that demand from transit companies could spiral since attacks on staff are increasing.
For April 2011, Square Mile number crunchers see profits pushing up to £1.8 million, ahead of growth to £2 million by 2012 as revenue builds to £14.7 million. Estimated earnings of 0.32p place the dividend-paying shares – currently 1.75p, giving the group a £7.9 million AIM tag – on a forward p/e of 5.5 times, a significant discount to peers.
This rating reflects size risk as well as the threat of order delays amid current inclement economic climes. Nevertheless, Newmark looks unfairly unloved, given its profitability and exciting investment in ATM protection. The shares are a long-term lock-away.