Petards Share Discussion Threads

[soundbuy] 09/5/2019 07:29

Aye,comforting read..........

[rivaldo] 09/5/2019 07:19

A good AGM statement today. Nicely in line, and the order book for 2019 has increased since the year end to £14.6m from £13m, i.e this year's forecast revenues are already two-thirds covered.

And it seems we should have "significant" contract news soon:

"management's focus continues on building on the current order book for 2020/21 where it is in discussions with its customers over new business across the Group, in particular for Rail Technology where a number of significant new contracts are in the offing."

With the rail investment phase now completing, QRO and RTS performing well, and more acquisitions explicitly stated today as on the cards, PEG looks in good shape going forward.

[rivaldo] 08/5/2019 08:52

Cheers AISHAH. Looking encouraging online - you can sell 30k at 24p, but only buy a maximum 15k at 25.9p.

[soundbuy] 08/5/2019 07:55

Ta..........

[aishah] 07/5/2019 15:54

Latest Techinvest comments that shares look undervalued and repeats its buy rating.

[soundbuy] 03/5/2019 11:48

Agreed......

[rivaldo] 03/5/2019 11:17

Good to see a couple of ticks up this week, including after a 30k buy this morning.

[rivaldo] 01/5/2019 15:13

Oooh, cheers, missed that (I skipped to the portfolio summary). A great shame as there aren't that many small cap funds around. It'll take up to two years, so plenty of time yet.

[rhomboid] 01/5/2019 12:54

Hi Rivaldo

You missed out the next bit about the winding up of the fund & the sale of all their holdings

‘Given the decline in the size of the Company (resulting from the program of tender offers and the recent decline in asset values) and the inevitable impact which this has had on the expense ratio, the Board has decided to formally pursue a strategy for winding up the Company and maximising the value for Shareholders from the remaining assets.



As and when value and liquidity are restored to the AIM traded shares these will be realised, with the cash proceeds being used firstly to settle all outstanding liabilities at that time and secondly to return value to Shareholders via a further tender offer or buybacks.



Subject to the valuation of any remaining illiquid assets at that time, the Board will examine the most tax efficient manner of returning value to Shareholders. ’

[rivaldo] 01/5/2019 12:34

Chelverton Growth Trust has just issued its results, and they had this to say - they have a £500,000 stake in PEG:



"CEPS is being built up by the growth of its underlying investee companies and by strategic "bolt-on" acquisitions. The results have, in common with any developing company, been difficult for shareholders to interpret, however we are confident that there is significant value that in time will become clearer.

Much the same could be said for Touchstar, Petards and Universe which are all making progress and appear to be undervalued at this time since the share prices have not risen to reflect this progress."

[rimau1] 25/4/2019 20:12

Canadian aerospace and defence manufacturer Bombardier has slashed its full-year revenue forecast from $18bn to $17bn due to timing of aircraft deliveries, production challenges in its train-making division and unfavourable currency conversions.

[soundbuy] 23/4/2019 11:11

Cheers for that........

[rivaldo] 23/4/2019 08:27

New Buy tip for PEG - "big upside potential" with 2.65p EPS forecast this year:



"Petards Group – this minnow has big upside potential
By Mark Watson-Mitchell 18 April 2019

Despite its size this group is a global leader in the provision of security, surveillance and communication technology solutions. In the technology sector, these shares are seriously undervalued and due a re-rating.

When Petards Group (LON:PEG) announced their 2018 finals last Thursday, the company’s shares fell back from 25p to 22p in reaction. On the face of it, from what I can see, the shares of this advanced technology company are going the wrong way; however, it does give investors the opportunity to pick some up a lot cheaper than previously offered.

Established some 60 years ago, Petards Group was listed on AIM way back in 1997.

On the Rail side, which makes up about 60% of group sales, it puts together digital on-train surveillance subsystems for fitment to new build or retrofitted to existing rolling stock. These video and sensor systems include applications for Driver Controlled Operation (DCO); for Automatic Selective Door Operation (ASDO); and for condition monitoring, saloon car CCTV, drivers view cameras and automatic passenger counting systems – all of which are marketed under the ‘eyeTrain’ brand.

Petards’ solution systems have been designed over the years, in close collaboration with both the train operators and the train builders. They help to maximise safety and performance, at times when passenger numbers are ever increasing.

Rail clients include: Bombardier, Stadler, Siemens, Hitachi, Govia Thameslink, Southern, Northern, South Eastern, Gatwick Express, KiwiRail, Virgin Trains, WM Trains, Transport for London, Network Rail, South Western, LNER, C2C, GWR, ScotRail and Porterbrook.

The Traffic division of the group centres especially around its Automatic Number Plate Recognition (ANPR) camera-based surveillance technology. It is used to monitor any situation involving traffic, from police speed enforcement solutions to public toll roads and digital signage for commercial premises.

Its ‘ProVida’ system overlays detailed information regarding incidents and crimes, such as dangerous driving and speeding, onto captured video footage, which can later be used as evidence in a court of law.

ProVida is a Visual Average Speed Computer (VASCAR) system. It is a standalone, enabling it to be used without a full in-car computer system and it can be used when moving or stationary, with the target vehicle travelling in the same direction, in front or behind the surveillance vehicle.

These systems are sold to UK and overseas law enforcement agencies and UK based commercial customers, such as Cheshire Police, the Home Office, Thames Valley Police, Hampshire Constabulary,

The services offered by the Defence part of the group are based upon leading innovation in complex, technology focused solutions and software for land, sea and air. It works for and with national and international military organisations, prime contractors and highly accomplished third parties to design and build ruggedised electronic solutions for a wide range of applications and purposes.

It creates specialised military and commercial communications systems. It provides electronic defensive countermeasure systems for fitment to rotary and fixed wing aircraft, threat simulation systems and mobile radios predominantly for the UK Ministry of Defence.

This division boasts an impressive list of clients, including the Royal Air Force, the Army, the Royal Navy, the Ministry of Defence, BAE Systems, Leonardo and Stadler, NATO Oman, amongst many others.

For the whole of this group I am impressed by its list of clients and I understand that its order book, for this current year and next, is already at substantial levels. That workload will have been boosted, no doubt, by its latest £1.5m plus contract from Bombardier Transportation, announced late last week. For that company Petards is to fit its eyeTrain video and data solution in to its Aventra trains – adding further to its installed base with Bombardier.

This group, valued at a mere £12.6m, has 57.5m shares in issue of which some 74% are in firm hands. Apart from the Board holdings, fund investors include Downing Active with 6.3%, Miton UK Microcap with 4.6%, and Chelverton with 3.5% of the equity.

I consider that they are all on to a winner with Petards. Although it is in a fairly competitive and international market place, it does seem to offer what its clients are seeking and, as its order books increase, I see its profits moving forward at a faster rate.

For the current year brokers Hybridan are looking for £19.4m of revenue and pre-tax profits of £1.52m, worth 2.65p per share in earnings. At only 22p that puts the shares of Petards Group out on a current year 8.3 times rating, whereas I would rate them out on at least 15 times, which would be about 40p.

In the technology sector, these shares are seriously undervalued and due for a re-rating."

[rivaldo] 16/4/2019 09:22

With 2.4p EPS forecast this year - and a £1m cash pile - a 23.5p share price looks pretty cheap to me.

Especially with £14m of this year's forecast £19.4m sales already secured by order books (including £1m from the new £1.5m contract win) - up from £12m at the same point last year.

R&D expenditure is stated to be "much lower in 2019", which will help cash flows and thereby the potential for further acquisitions.

Development costs will be matched amortisation-wise to sales of the upgraded/new products as is customary.

The results will be H2-weighted, but the market is used to this - and PEG is in a better situation to most companies because they've already secured most of the necessary orders for the year.

It's encouraging that there is evidently demand out there for EC's stock. Given the potential for new contract RNS's, and the confidence in the outlook as below, I remain optimistic, especially at this current share price:

"The Group has a strong pipeline of new contracts under negotiation which it is anticipated will add to the orders for delivery in the second half of 2019 and for 2020. These together with the Group's strong market position provides the board with confidence in its prospects for the year ahead".

[effortless cool] 15/4/2019 20:25

Well, I was a bit too pessimistic above. My valuation is actually just below 20p, rather than well below, although I do feel it is vulnerable to the downside.

[effortless cool] 15/4/2019 13:25

I was very disappointed with the recent results, which clearly reflected the impact of various issues that we had been given no prior indication of. Also, with hindsight, I find it hard not to be now suspicious regarding their delayed publication. For example, the big step up in capitalisation of development costs may, in practice, have led to extended discussions with auditors.

I fear for the 2019 H1 results. Revenue will likely be down on the prior year due to the H2 weighting already flagged and profits will be adversely impacted by amortisation - the inevitable eventual downside of capitalising all of those development costs.

I'm still working through my numbers, but my valuation will be falling to well below 20p. I was very pleased to be able to exit my position in dribs and drabs above 23p today and will be looking for it to fall back below 15p before I would even consider buying back in.

Good luck to holders - I hope I'm wrong.

[rivaldo] 12/4/2019 10:40

Cheers LeoInvestorUK.

To clarify, WH Ireland have noted PEG achieving 2.1p EPS for last year - slightly ahead of their forecast 2.0p EPS - with 2.4p EPS forecast this year.

They also see the cash pile increasing to £1.5m at the end of this year from the current £1m.

[leoinvestoruk] 11/4/2019 10:05

From my blog over the past few days. (Find me on Twitter)

Results preview
===============

Background

Petards describe themselves as a “developer of advanced security and surveillance systems”. Their three product areas are Rail (CCTV and other sensors), Traffic (ANPR systems) and Defence. They presented at Mello Chiswick 2018 where the presentation by Paul Negus (Group Business Development Director) went down particularly well with attendees.

[Link to Mello 2018 Presentation]

The largest part of the business at present, and almost certainly the part with the most potential, is the rail sector. Here (as in traffic) they claim to the be dominant supplier in the UK. In the presentation they list several UK contracts they have won or hope to win in the near term.

In the medium and longer term they should have good strategic opportunities to grow outside the UK. Adoption of cameras on trains and other equipment such as selective door opening are becoming common in the UK but are in their infancy in Europe and many other parts of the world. Since their immediate customers are mostly global train builders they have an opportunity to also become the dominant supplier of this equipment in Europe and elsewhere as adoption increases.

In terms of margins, they believe these should start improving as they move from custom development to integrate with each manufacturer’s systems to selling more of a completed product.

On the negative side they provide cameras to support driver-only operated trains which are a a meeting ongoing resistance from the rail unions.

Recent Events

Since September 2018 there have been no contract win announcements, and although during the same period in 2017 there was only one contract win announced, this will have been a disappointment to some.

For the past three years they issued their full-year results bang in the middle of March and there was some expectation they would do so again this year. It wasn’t until the 25th March that they announced that they would come out tomorrow, 10th April. There is always the suspicion that bad results take longer to prepare than good ones and that perhaps they were hoping to soften the blow of missing expectations by being able to announce a contract win.

It is therefore unsurprising that the share price has been drifting down recently, however if results are in-line, with a positive outlook, then they look good value. Stockopedia reports a forward PE of 10 and a PEG of 0.5 and there is potential for improving margins to improve their quality score plus long term growth opportunities.

Current expectations

Expectations are for a turnover of £18m vs £15.6m in 2017, with an normalised EPS of 2p vs 1.78p.

Disclosure

I hold shares in Petards and am likely to add on neutral or positive news tomorrow.

Results commentary
==================

The main news for me today [yesterday] is the Petards (PEG) results.

The good:

* Revenue of £20.0m is above expectations of £18m.
* Normalised pre-tax profit up nearly 60%.
* Small contract win separately announced today (as I speculated), with work commencing immediately.
* Order book up and further orders expected.
* Net funds down only £0.3m despite £1.25m acquisition.

The bad:

* Second half weighting for FY2019.
* Warning of reduced defence business in FY2019.
* Order book (at year end) is only modestly higher at £19m vs £18m of which the forthcoming year is up from £12m to £13m.
* Gross margins down.
* Normalised EPS not reported and I cannot immediately compare to forecasts.

I would expect a modest rise in the share price this morning. However I already have a moderate position and due to the negatives highlighted above I will be holding off adding until there is an unjustified price fall or further positive news.

Comment made today
=================

Petards’ share price did indeed rise first thing, but it seems that investors then focused on the negatives I highlighted as it has since fallen back 15%, close to 12 month lows.

My suspicion remains from the delayed results and simultaneous contract statement that management were disappointed by the performance of the business even if this doesn’t quite come through in the figures. Interestingly the Beneish M-Score is relatively high which is statistically associated with a risk of earnings manipulation.

[bones] 10/4/2019 11:17

Unfortunately, the liquidity malaise has affected most smallcaps that are not infested by gamblers.

The upside is that, once the UK political and economic issues subside, people will begin reversing their drawdowns from U.K. equities and begin attributing more optimistic valuations on smallcaps. For now, I see many bargains for those with patience to hold.

I do not currently hold PEG but it is on the watchlist.

[soundbuy] 10/4/2019 10:26

Cheers for that......

Tempted to add........zzzzzzzzz

[rivaldo] 10/4/2019 10:02

WH Ireland retain their forecast of 2.4p EPS this year and their 34p price target:

"Significant investment has been made in the next generation of its eyeTrain
software solutions in recent years, which should further enhance Petards’ position
in the rail market where it already works with five of the six key train builders.
Following the results, we leave our forecasts unchanged, which should be well
underpinned by the strong order coverage and pipeline being seen (WHI est. FY
2019E PBT £1.5m, EPS 2.4p; FY 2020E PBT £1.6m, EPS 2.5p).

The shares currently trade on a FY 2019E PER of 10.6x and EV/EBITDA of 5.5x. Given the
level of secured work, in addition to the pipeline of opportunities, we believe that
these multiples continue to undervalue the business. Our estimate of fair value
remains unchanged at 34p, which would imply a FY 2019E PER multiple of 14x."

[rivaldo] 10/4/2019 10:02

Indeed - now down 1.5p on just £20k of trades, presumably one or two of the usual small sellers on results.

Might have been better to have announced the new £1.5m contract win tomorrow rather than today, losing the impact in conjunction with the results.

[soundbuy] 10/4/2019 09:02

Fair assessment........

Liquidity liquidity.........zzzzzzz

[rimau1] 10/4/2019 08:55

The loss of the defence contract is a shame, margins should correct themselves with the project cost one offs not repeating this year. Given the huge rail market opportunity I would sell off the traffic and defence businesses and become a pure rail play. Oetards have carved out a fast growing niche market with huge barriers to entry and this is why i am invested. The defence business is too sub scale, a legacy distraction going back to the Vickers old school days and reliant on a single customer, the MOD.

[soundbuy] 10/4/2019 08:41

Ho hum...............