There are not many companies quoted on the London markets that have nearly quadrupled in price this year alone – but the £157m-capitalised Filtronic (LON:FTC) is certainly one that has to date.
Its shares have risen from 21.30p on 2nd January to a recent peak of 80p, before easing back to the current 72p.
And I consider that there is even more to come yet.
Tomorrow morning’s Final Results announcement should make some very good reading and give investors even more confidence that there will be more in store.
The Business
The Sedgefield-based group designs, develops, manufactures, and sells advanced radio frequency communications equipment for the telecommunications infrastructure, aerospace and defence, critical communications, and low earth orbit (LEO) space markets.
The company not only operates in the UK, but also in the rest of Europe, the Americas, and internationally.
It provides Morpheus II, an E-band transceiver module; Hades, an E-band active diplexer; Cerus, an E-brand power amplifier for long-range E-band communications; tower top amplifiers; Orpheus, an ultra-high-capacity turn-key solution for back-haul, front-haul, and mid-haul; switched filter banks; GaN amplifiers; custom filters products, including metal cavity, ceramic, combline, interdigital, lumped element, suspended substrate, waveguide, and thin-film filters; and custom combiner products.
The company also offers interference mitigation filters; transmit and receive modules; microwave and mmWave transceivers; front-end modules, such as power amplifiers, low noise amplifiers, switches, filters, power detectors, baluns, and other products; ceramic, combline, lumped element, metal cavity, suspended substrate, thin film, and small cell filters; waveguide diplexers; and cross-band and in-band combiners.
In addition, it provides contract design and microelectronic manufacturing, RF design and testing, and process engineering services.
Recent Wins
Earlier this month Filtronic announced that it had received a follow-on order from SpaceX worth $9m.
This is the second order that the group has received since it signed a strategic partnership with SpaceX in April this year.
On 24th April the company declared that it had secured a long-term partnership with SpaceX in the LEO space market, initially worth $19.7m.
Space Exploration Technologies Corp. designs, manufactures, launches and operates the world’s most advanced rockets and spacecraft.
The Strategic Partnership includes the ongoing supply of E-band Solid State Power Amplifiers, in addition to the development and supply of similar products at other frequency bands within SpaceX’s Starlink platform.
The group has declared that recent success in the aerospace and defence markets with contract wins from BAE, QinetiQ and the UK Defence Science & Technology Laboratory, augmented by demand from the group’s long-established customer, gives it confidence for revenue growth in the outlook in this market.
Western governments are now investing more in their defence capabilities from growing global threats, and with the need for a UK sovereign defence supply chain remaining critical, the group feels well placed to win more business with large defence primes actively seeking to engage with the SME market.
Year-End Trading Update
Towards the end of June, when giving out the end of May Trading Update, CEO Nat Edington stated that:
“The space market continues to present significant growth potential for Filtronic.
The recent Strategic Partnership we entered with SpaceX is exciting for all of our stakeholders.
It gives a platform to develop the business and puts us in a stronger position to capitalise on the plentiful opportunities in the core markets we serve.
We enter the new financial year with a very strong order book, a growing list of customers, including key strategic targets that we have secured in the year, and an opportunity pipeline that continues to grow and mature.”
Analyst Views
At Cavendish Capital Markets, its analysts Edward Stacey and Kimberley Carstens have a Price Objective of 91.9p on this group’s shares.
They are anticipating further orders from SpaceX, which they reckon substantially de-risks the group’s ratings.
For the year to end-April 2024 they have estimates out for £25.4m (£16.3m) revenues helping to significantly boost the group’s adjusted pre-tax profits from just £0.1m to £3.6m, jumping its earnings up 14 times to 1.4p (0.1p) per share.
The benefit of greater orders in the current year could take turnover up to £36.0m worth £6.4m in profits and generating earnings of 2.7p per share.
My View
With the LEO part of the group’s business underwriting some 50% of the 2025 expected revenues, this company is on the cusp of really lifting off.
Tomorrow’s results statement is awaited with great interest.
I see at least 100p a share, against the current 72p, within the short-term.