Retec Share Discussion Threads

[dollarhogger] 05/1/2008 17:50

Hi guys

Thought you might like to see this....

Buy Retec Digital at 3.75p

Says exclusive small cap specialist website UKMicrocap.com

The Investment Case: Retec Digital (RET) operates digital point of sale 'guided selling' and self service technology applications. It boasts a blue chip client base and is benefiting from the need for retailers to compete with online information. The stock currently trades on a June 2009 multiple of just over 5 times.

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Company Description: Retec was formed in 1999 and has since grown organically and through the acquisition of InStore Interactive in 2004. In 2006 it listed on AIM through the reverse takeover of Elite Strategies, and acquired two subsidiaries, Retec Interface Limited and Media 4 UK. The group provides retailers with a product offering known as 'Guided Selling packages'. This is based on a touch screen technology which customers can interact with to perform several functions. Customers of Retec's clients can use the screens to search for a product, to preview a DVD or even to top up a mobile phone and for many other functions. The major selling point of the product is that these screens can increase sales and improve customer satisfaction.

Retec has recently rolled out several large contracts with big retailers such as Tesco and Sainsbury and in partnership with IBM for Argos Woolworths and Boots. Retec Interface is providing its Entertainment Xtra product to both Sainsbury's and Tesco. This is a product that is deployed in the Home Entertainment departments of these retailers, providing customers with the opportunity to preview music, films and games ahead of the purchase decision. Retec now has this system in 171 Sainsbury's and 39 Tesco stores. In partnership with IBM UK Limited, Retec has gained work from Alliance Boots, Argos and Woolworths during the year. The work for Alliance Boots is to replace 1,200 Advantage Card kiosks in 500 stores.


The company's last set of results covered the 12 months to 30th June 2007. The figures are not comparable to the previous period as the company was previously a cash shell and the acquisitions over the year of Retec Interface and Media 4 have significantly changed the group. Revenues for the period stood at £4.07 million with a pre-tax loss of £0.843 million and a loss per share of 0.87p. On a like for like basis revenues in the core Retec Interface business grew by 142% to £4.5 million in the year to June 30th 2007. Gross margins increased from 8% to 26% and losses before tax were reduced by 60% to £425,000. Net cash at the end of the period stood at a healthy £1.044 million, boosted by a £1 million fund raising over the year.

Management: Retec is led by John Cole as CEO, with over 25 years in the retail sector, and specifically in point of sale operations. He founded Retec in 1999 with the goal of creating an interactive point of sale technology offering a broad level of functionality. Sir Brian Ivory is the chairman, and was formerly the head of Highland Distillers Plc. He is also a non executive of various public companies including HBOS and Remy Cointreau SA of France.

Bull Points:


- Blue chip client base

- Predictable revenue streams ahead

- Operates in a specialist, growing sector

Bear Points:

- Currently loss making

- Exposed to retail and consumer spending cycles

- Came to market via a Stephen Dean cash shell. Dean is out but his past association does not help

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Assessment and 2-year Target: With several pilot schemes underway for new and existing clients the company's sales pipeline looks good, especially at Sainsbury and Tesco where feedback on the current Entertainment Xtra systems has been good from both a sales and customer perspective. There is potential to expand out of the entertainment sections of these stores and pilots are underway at Tesco for putting products in another part of the store. In the pipeline the company also has pilot schemes with Asda and its partnership with IBM is producing leads.

Year to
30th June Sales
(£m) Pre-Tax Profit (Loss) (£m) Fully Diluted Earnings (Loss) Per Share (p) PE Ratio
2007A 4 (0.825) (0.87) NA
2008E 7.5 0.5 0.32 11.7
2009E 9 1.3 0.72 5.2

For the year to 30th June 2008 we expect Retec to post revenues of £7.5 million, with pre-tax profits of £0.5 million and fully diluted earnings of 0.32p. This puts the shares on a current year multiple of 11.7 times earnings falling to a bargain 5.2 in 2009 on the back of 0.72p of earnings. Strip out net cash of 0.8p a share and the rating looks even less demanding.

This is a relatively early stage company and has it all to do to win new contracts, but good progress has been made on this front already and we are confident that 2009 could be a big year for Retec. We believe that a mid-teens multiple would be fairer for this stock and on that basis we can see the shares trading at 5p by the second half of 2008. Buy.

Key Data
EPIC: RET
Market: AIM
Spread: 3.5p – 4p (12.5%)

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Good luck
$

[wcjan26] 05/1/2008 11:04

Could probably add a couple of restaurant groups too to this

[wcjan26] 05/1/2008 11:03

ALY.L - bought out
BLSA.L - more profit warnings
CC-.L - more profit warnings and deservedly so.
CPR.L - ditto - outside chance of going bust
CPW.L - bought out
DEB.L - more profit warnings
GMG.L - will finally turn south
JSP.L - had it
KGF.L - bought out
SIG.L - rights issue
SUY.L - had it
WLW.L - emergency rights issue

[wcjan26] 05/1/2008 10:55

Looks like 2008 could be an unprecedented year for retailers, in UK and abroad.

I'm expecting at least one household name to go the the wall and a couple of others to get bought out.

Welcome your predictions below

[aiminvestor] 01/1/2008 22:55

One of my stock picks for 2008 along with SGD.Both very nice little companies well worth inveting a few pounds in.

[run rabbit] 01/1/2008 22:16

Yes and some taking advantage of that however still a way to go to realise a true value in this stock.

[masurenguy] 31/12/2007 01:02

Tipped in the IC last month and broker Charles Stanley also rates it a Buy !

[run rabbit] 30/12/2007 23:01

This company is well positioned in the market and a couple of good contracts should see the share price much higher.Been a fair bit of buying recently and being new wonder if the company is a bit leaky? Can anyone advise?

[tornadodown] 28/12/2007 14:00

Buy 50K at 4p vs sell 375K at 3.62

Just need the buying to continue and we should see some good gains.

[tornadodown] 27/12/2007 20:44

Usually see those largish buys preceeding a tip somewhere.I have seen the pattern many times.Someone also mentioned another contract on here but no confirmation as yet.A good solid company with potential moving forward.

[run rabbit] 27/12/2007 13:42

Happy new year too. Looks like you have started one of those spikes.

[tornadodown] 27/12/2007 13:23

Well the overhang seems to have been cleared.I think we can expect some news in early 08.

[tornadodown] 27/12/2007 12:27

Happy New Year RR. Online limits

Buy 25K at 3.6
Sell 150K at 3.5

[run rabbit] 27/12/2007 11:54

Would be about time for another move higher.IC tipped some weeks back and maybe another tipster has it on their New Year list. Another good buy just reported too.

[tornadodown] 27/12/2007 11:16

Hopefully this maybe a top performer in 2008.A couple of good buys have shown today so let's hope we get some positive news flow in the comming year.

[currypasty] 17/12/2007 11:02

one blue MM though, now 2v2

[masurenguy] 17/12/2007 11:01

Agreed, but no impact so far on the share price !

[tornadodown] 17/12/2007 10:59

Well after days of inactivity it is nice to see someone picking up 150K today.Long may it continue.

[wonder boy] 05/12/2007 12:27

Forward PE of 4 based on the latest Equity Development research note. I think the catalyst for a re-rating is going to be some form of M&A rather than further contract wins. Most likely is a takeover by DC Thomson, New Media Spark, Avanti or Mediazest. Only a matter of time.

[run rabbit] 29/11/2007 15:12

Interesting trade there.Are we going to see another one of those spikes that we can see on the abover graphs I wonder?Seeing as it was tipped in IC a week or so back it probably is on quite a few peoples radars and it may stimulate a little more buying activity in the comming days.

[tornadodown] 29/11/2007 13:28

Own up encarter was that you taking the 3/4 million.Thank you for the heads up.

[encarter] 29/11/2007 12:51

TornadoDown i've edited my last post. It's nice for us small investors to get a head start but you can't be too careful. You can take it from me though that it's a fact and not just a rumour. Announcement shortly.

[tornadodown] 29/11/2007 12:07

Thanks encarter.Maybe when released we may quickly see 6p here.