Intelek Share Discussion Threads

[topvest] 29/3/2009 21:38

Jeff H - I've been looking at these after buying some shares recently in Rights and Issues Investment Trust which owns 20%. The group looks to be doing quite well. May be tempted if the price comes down to below 15p. What are your thoughts on this one? Main downside appears to be the pension scheme deficit in my opinion.

[jeff h] 19/3/2009 23:07

CML seemingly still on course:-

[jeff h] 30/1/2009 19:57

The co. got a nice new website:-



.....and it includes a nice new resarch report from Altium

[thickasmince] 08/1/2009 00:12

It was the first word that came to mind. Getting old you know and can't find the words these days. A bit like my glasses when I take them off.

[emptypiggy] 07/1/2009 13:45

thats a big caboodle mr mince,,,, had to read that twice to sook it all in

[thickasmince] 02/1/2009 23:24

Someone else likes it. Sorry, for some reason the link wasn't linking so cut and pasted the whole caboodle, if that makes any sense.


Buy Intelek at 16.5p

A tip from SmallCapShares.co.uk

We first tipped Intelek in the April 2006 newsletter at a price of 12.5p. Since then the shares have been on a bumpy ride, rising to 23.5p by July 2007 but coming back down to earth on the back of the small cap sell off. At the current price of 16.5p we are still up on our original tip but given progress that the company has made in recent months we believe that Intelek is worth looking at in detail once again.

THE BUSINESS ▼

The company operates through three divisions. Acquired in February 2001 and now the largest division of the group by revenues is Paradise Datacom. The division is a leading designer and manufacturer of satellite communication equipment, including modems, amplifiers and other equipment which enable satellite data to be transmitted and processed. The company has manufacturing plants both in the US and the UK and through the opening of an office in Bangkok, Thailand in April this year and a sales and engineering services office in Beijing, China, it now has a foothold in the rapidly growing Asian markets. Its main customers include government organisations, telecoms firms and oil and gas operators. Following recent consolidation in the industry Paradise is now the second biggest market player.

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CML, is the second largest division by revenues. It manufactures structures and system components for the aerospace industry, with its largest customer being aircraft manufacturer Airbus, with which it has over two years to run on a supply contract worth an estimated £5 million per annum. Within CML there are four divisions which are based in Birkenhead, Merseyside. Precision machining specialises in the manufacture of aircraft components using aluminium and hard metals. Composites focuses on the manufacture and repair of carbon fibre and glass components and assemblies. Fabrication manufactures fuselage and other products for new build and spare parts requirements. Finally, Treatments provides surface treatments to both in house and external customers.

Finally, the smallest division by revenues Labtech, a business which was originally acquired in 1990. Labtech is a manufacturer of high-end microwave components and microwave circuit board which are mainly used in the defence and telecoms markets and space systems. Main customers include Ericsson, BAe Systems and Alcatel, as well as the Paradise Datacom division. The company currently has two manufacturing divisions based in the UK: Labtech Microwave, located in Milton Keynes and Labtech Circuits, based in Wales. Trading in the division has been volatile in recent times, especially in the 2007 financial when the company lost two large telecoms customers. However, a repositioning towards the buoyant defence markets has recently put it back on track.




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CURRENT TRADING ▼


Intelek saw revenues rise by 8% to £18.8 million in the six months to September 2008. As well as seeing strong underlying sales growth the numbers were given a £0.3 million boost from the strengthening US dollar. An improvement in the underlying operating margin from 10% to 13% helped underlying operating profits to grow by 34% to £2.37 million, with underlying profits at the pre-tax level up by 39% to £2.05 million. These were ahead of management's original expectations for the year. Underlying earnings grew by 43% to 1.64p and this funded a 10% hike in the interim dividend to 0.165p. Intelek ended the period with a strong order book and good potential pipeline in each of its divisions.

Net cash from operating activities was just under £1 million for the period, up from the £101,000 generated in the first half of the previous financial year. The net debt position stood at £3.81 million at the end of September, down marginally on the £3.86 million seen at the end of March and down from £5.65 million a year prior. Interest cover rose from 7.6 times to 15.4 times. The pension deficit was further reduced to £4.8 million by the end of September.

*The value of investments can go down as well as up. Past performance is no guarantee of future success. Investing in equities can lose you part or all of your capital. The tips given here are of necessity, general. They cannot relate to the individual circumstances of investors. Anyone considering following the recommendations contained here should seek independent advice. Investments in smaller company shares, by their nature, can be relatively illiquid and thus hard to trade. And that makes such investments more of a high risk than larger company shares.

OPPORTUNITIES & RISKS ▼


Paradise Datacom in particular has excellent growth prospects. Industry experts, Futron Corporation, estimates that demand for global commercial satellite services will double in the next decade on the back of growth in demand for broadband, VoIP, high definition television and other services. With the growth in infrastructure required to meet the demand for these services, as well as other uses such as military, we believe that Paradise Datacom looks well placed to take advantage. With the recent merger of the number one and previous number two businesses in the industry, Radyne and Comtech, Paradise could potentially win new business from those customers who have demonstrated concerns about the merger, as well as from the many companies which will have to look for products outside of the merged company due to having a multi-sourcing strategy. In addition, with the majority of revenues in the division (and the company) denominated in US dollars Intelek looks set to benefit from the recent strengthening of the currency.

In terms of the risks the net debt is not a major problem as net finance costs are comfortable covered by both profits and cashflow. More of a worry is the pension deficit, which at £4.8 million is rather high for a company of Intelek's size. However, good progress has been made in reducing this in recent years. Since March 2005 the obligation has fallen from £12.9 million. The liability does remain on the books however and with the recent stock market falls is likely to have worsened since the half year end.

ASSESSMENT ▼


The positive interim results have set up Intelek to put in a very strong performance for the full year. For the 12 months to March 2009 the company's recently appointed house broker expects revenues of £40.2 million, adjusted pre-tax profits of £4.1 million and earnings of 3.3p per share. In 2010 revenues are set to grow to £42.9 million, pre-tax profits to £4.5 million and earnings to 3.6p. We note that the old house broker was estimating 3.3p of earnings for 2010, meaning that if the company meets its forecasts it will effectively be a year ahead of what was originally expected. On a 2010 price earnings multiple of 4.6 and PEG of 0.5 we believe that the pension and debt concerns are more than factored in to the current price. BUY.

Key Data

EPIC: ITK
Market: AIM
Spread: 16.25p - 16.5p (1.5%)

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[santangello] 02/1/2009 17:26

Good spot Jeff.
I was in work (ghost town) so I enjoyed watching the action from my desk today. Spread a bit defensive, but every little helps.

All the best by the way buddy.

(Off topic), did you see TNO go today? :)

[jeff h] 02/1/2009 14:14

Tipped today by UK-Analyst.com

[thickasmince] 19/12/2008 16:52

Does this wee gem not know were in a recession. They really must stop wining these contracts, it may spoil an otherwise dour market.

[santangello] 19/12/2008 09:37

ADVFN now showing announcement.

Very nice award.

[bostonborn] 19/12/2008 07:18

New contract for Labtech, approx £1m in 2009, for two European customers, see latest news; but you may have to look else where as it doesn't show fully on advfn yet.

[mjcrockett] 01/12/2008 12:58

There are a few paragraphs about ITK in the December edition of Aimzine. The ITK reference is in the article on 'AIM for Income'. Aimzine is a free online magazine - register at

MJ

[jeff h] 27/11/2008 08:45

Altium & Redmayne Forecasts now out.

Pbt £4.1m & £4.0m EPS 3.3p & 3.2p for Y/E 31/3/09 from each broker

[jeff h] 26/11/2008 23:55

Yes, well within range I'd say penpont.

The webcast on the company site mentioned H2 normally stronger than H1,
and will have a greater contract win and currency benefits I reckon.

I look forward to the broker updates...Altium I think is new coverage.

[penpont] 26/11/2008 19:48

Jeff - the PTP you mention looks achievable barring any unforseen deterioration in their markets, and would suggest, say, up to 3.8p is possible for the year?

[jeff h] 26/11/2008 12:30

How much pre tax you reckon for the year penpont?

I'll say £4.6m to £4.8m actual though I guess the brokers will forecast less.

[penpont] 26/11/2008 11:15

The broker forecasts must surely be upgraded following the interims - 3.5p looks possible.

Comment from the IC below.

Intelek looks to government contracts

Created: 25 November 2008 Written by: Julian Hofmann
As a niche aerospace components manufacturer, Intelek has managed to land several high-value contracts and a deal to supply composite materials for the new Joint Strike Fighter. These deals should ensure a good stream of revenues for some time.

Chief executive Ian Brodie said that the company hasn't seen a slackening in sales since the half year-end and expects further market share gains by the end of the financial year. He does not think that a decline in US defence spending will happen fast enough to affect the company's sales. Of Intelek's three divisions, its satellite communications arm forms the bulk of the business with sales of £8.1m at the half year (£7.8m in 2007); the company aims to start marketing its products to governments and aims to establish a foothold in defence procurement.

Broker Altium Securities predicts pre-tax profits of £3.3m and EPS of 2.8p (£2.3m and 2.1p in 2009).


TIP UPDATE:
Buy - Intelek's shares are down on our buy tip (20p, 23 Nov 2007) but have comfortably outperfomed the small cap sector. On a forward PE ratio of 5, they remain a long-term buy.

[santangello] 25/11/2008 08:04

Breakfast tasted sweet reading those results.
More added....

[balcony] 25/11/2008 07:59

One of the few positive trading statements from any company lately,

[santangello] 17/11/2008 20:51

8 days to (anticipated good) results and we have a persistent 25k seller......something not right here me thinks ?

[santangello] 07/11/2008 18:46

Nice chunky buy over the offer (T+25?)

[nickcduk] 03/11/2008 07:51

A bullish enough trading statement today. Throw in the currency benefits and the shares are trading at about 3.5 times earnings. I think ITK is a sitting duck for a potential bidder.

[jeff h] 02/11/2008 13:26

Paradise is seemingly moving ahead strongly... I liked this bit from the below:-

"In May 2008, Paradise Datacom announced the creation of a maintenance and repair center in India. Services will be performed by Eltel Systems in their facility located in Bangalore. The declaration came with a recent announcement by the company regarding the establishment of a sales and service facility in Bangkok, Thailand. According to the company, it would open a similar facility in China to support the business."



So that's expansion in India,Thailand and China and also a recent contract announced in Indonesia.

blueliner - Bramwell owns 1,500,000 shares per the Annual Report

[blueliner] 31/10/2008 07:07

What puts me off re entering this stock apart from the tiny m/cap,
is the lack of director holdings & buying, Nigel Mills excepted.
What is his position now?
Cannot find details of Bramwell's holdings.