Solving the global problem of maritime domain awareness is what this company is all about and in this current year it is due to swing massively into profit.
This group’s target market is the world’s 26m vessels, millions of buoys and tens of thousands of ports dispersed across millions of km of coastline and over 370m square kilometres of seas, lakes and inland waterways.
Since 1987, customers from around the world have relied upon this company to provide them with solutions for their maritime monitoring, management and surveillance objectives.
Global leader in its sector
Based at Midsomer Norton near Bath and capitalised at just £65m, SRT Marine Systems (LON:SRT) is the global leader in Automatic Identification Systems based maritime domain awareness (MDA) technologies, products and systems.
It provides high performance proven turn-key MDA solutions for applications for vessels, ports, environment agencies, fisheries, and coast guards that deliver enhanced monitoring, surveillance, safety and security.
The group’s multi-billion-dollar global market takes in some 8m commercial and 18m leisure boats.
There are requirements for continued and improving security, safety, sustainability, environmental protection, economic and commercial safeguards.
Also, there are literally millions of kilometres of exclusive economic zones (EEZ) that have to be protected.
Two main operational divisions
The group has two main sides – digital automatic identification system (AIS) transceivers and integrated marine domain awareness (MDA) systems.
The three main operating subsidiaries are:
SRT Marine Technology, which develops and provides customised core technology and OEM product and display solutions to marine electronics brand owners wanting their own range of high-quality customised AIS products;
SRT Marine System Solutions, which provides complete turn-key maritime tracking, safety and security system solutions to strategic locally based system integrators; and
EM-Trak Marine Electronics, which provides a range of ‘em-trak’ branded AIS transceivers to a global dealer network addressing price conscious commercial and leisure boat owners.
Group products
The group’s products range from high performance AIS transceivers to fully integrated national maritime surveillance systems which integrate extensive networks of sensors such as AIS, Radar, CCTV, and communications with intelligent command and control, display and data analytics.
Group customers
The company’s customers include: Leading system integrators; Marine electronics companies requiring white label AIS technology and product solutions; Individual vessel operators; Port owners and operators; and National authorities such as national defence agencies, fishery ministries, navies and coast guards who require sophisticated maritime surveillance and monitoring systems.
Recent Trading Update
An initial trading update for the six months trading period ended 30th September 2022, released at the beginning of October showed a significant improvement in its business.
During the first half revenues were £18.8m – a 300% increase on the same period last year (£4.7m), generating an expected profit before tax to be not less than £1.5m.
Despite continuing production constraints, the group’s transceivers business revenue grew by approximately 20% to £5.2m (£4.2m). While the systems business delivered multiple operational and several revenue milestones, generating some £13.6m (£0.5m) of revenue.
When announcing the interim Trading Update, CEO Simon Tucker stated that:
“These results validate our earlier statements that both our business divisions have recovered and are now performing well, driven by a combination of good quality SRT products and fundamental long term market demand drivers. We look forward to the second half and providing further market updates with our continued progress.”
Interesting equity positions
There are some 180.7m shares in issue of which the group’s directors hold 9.83% of the equity.
Two private client broking companies have holdings – Hargreaves Lansdown Stockbrokers hold 18.3m shares (10.13%) and AJ Bell have 5.6m shares (3.09%).
Five private investors hold another 35% of the equity in aggregate.
Analyst’s opinions – 100p Target Price
Lorne Daniel and Kimberley Carstens, at the company’s brokers finnCap, are very bullish about the company’s shares, fixing a Target Price of 100p against the current 35.75p.
They noted that in the past two years the pandemic slowed installation of existing Systems contracts and paused the processing of new deals, leaving the company to rely on just its £8m of Transceivers sales.
The analyst’s estimates for the current year to end March 2023 are for £56.6m (£8.2m) revenues, adjusted pre-tax profits of £6.8m (£6.4m loss), generating earnings of 3.8p (3.3p loss) per share.
Conclusion – ready for outlook estimates being upgraded
With the group ready to announce its interims results on Monday 14th November it is fair to expect some very favourable reaction.
The group’s shares were as high as 49p in early January this year, while they have since been as low as 23.6p.
Now trading at 35.75p, they are holding steady after the price rise in reaction to the favourable Trading Update at the start of the month.
On the basis of the finnCap estimates, it would appear that anticipation of achieving the current year’s estimates will be good enough to see the shares rise to trade up to 12 times price-to-earnings – which would be over 45p.
And that is without assuming that analysts will be upgrading their estimates for the coming 2023/4 and 2024/5 years after group guidance upon the interims being published.
Brokers finnCap are right, these shares are for buying.
