Spectra Systems Share Discussion Threads

[protean] 27/9/2013 07:04

Thanks for that GHF. I didn't know there were any broker recommendations and targets.

[glasshalfull] 27/9/2013 07:02

WH Ireland indicate that the company has good visibility for H2 & retain buy recommendation and 53p price target.

Regards,
GHF

[glasshalfull] 27/9/2013 06:54

Quite a lot to digest as you say harrogate.

Importantly they continually reiterate that results for the year are per market expectations & we are seeing the benefit of the acquisitions & formation of the Secure Transaction Group.

I'm particularly encouraged by their move into complimentary markets and it sounds like we can expect an acquisition in the "tax stamp" area and benefits that may accrue through cross selling opportunities.

Then we have a potential gamechanger in establishing a process for banknote cleaning and eye-watering revenue implications.

£15m valuation attributed to the company appears particularly low when considering their balance sheet & their iP.

Regards,
GHF

[protean] 27/9/2013 06:33

"In summary, we are confident the group will meet market expectations for 2013 and that our diligent efforts at expanding the scope of our products will result in continued and sustained growth in the future."

"The Company's prospects have both expanded and solidified in tangible and demonstrable ways."

"Our Current Gen materials will, we believe, experience a resurgence in growth based on new variants we are developing to expand the customization potential to central banks."

"With banknote production expected to reach 150 billion notes annually by 2017, our prospects based on the growth of our authentication business remain exciting and revenues and earnings will rephase once delays have become history."

"The prospects for our disruptive banknote cleaning technology are huge and will be fully quantified in the coming year."

[battlebus2] 27/9/2013 06:33

Financial highlights:

-Revenue ahead of last year at USD2,761,000 (2012: USD2,712,000)

-Loss before taxation of USD1,429,000 (2012: USD1,294,000)

-Basic loss per share of USD0.03 (2012: USD0.03)

-Strong ungeared balance sheet, with cash and investments of

USD14,231,000 (2012: USD18,426,000) at 30 June

Operational highlights:

Orders in place to meet market expectations for the full year

Major development milestone payments for the New Gen G-8 central bank materials totalling $718K

Sensor contract has been separated into Current Gen upgrade and New Gen sensors to align with New Gen materials development timeline

Current Gen upgraded sensors worth $8MM passed Field Acceptance Testing and are in Production Acceptance Testing. Manufacturing is expected to begin this year, with a target of delivering 15% of the sensors this year

$10MM G-8 central bank order, our largest yet, over 12 months received and on target for delivery of 50% of this year

Manufacturing facility completed, full security clearance by a G-8 central bank

Fully completed and tested consumer product lock and key solution has been postponed until next product revision cycle which remains unspecified

Contract on polymer banknote security feature development has been completed and additional options are being explored for funding

Phosphour sales to currency suppler are down 33% compared to 2012, and continue to be significantly lower than historical levels, most likely due to a shift in manufacturing of certain denominations from May 2012 to July 2013

Discussions with Asian central bank and its affiliates have gained traction since visits in February

Acquisition in the related areas of tax stamps and brand authentication is at an advanced stage of negotiations

New breakthrough technologies for banknote cleaning is attracting central bank interest from the European Central Bank and the Federal Reserve Bank of the United States

Secure Transactions Group is exceeding financial plan

Commenting on the interim results, Nabil Lawandy, Managing Director said:

"We have the orders in place to deliver a strong second half of the year performance and meet market expectations in spite of a continued slowdown of our high margin phosphour sales which, we believe is due to our customer's shift in production of certain denominations.

We are on track to deliver half of the Company's largest ever order from a G-8 central bank and to begin manufacturing and selling sensors relating to the $10MM contract executed in 2011.

This strong second half performance is further bolstered by the better than projected performance of our Secure Transactions Group that has recently sold the first version of our upgraded Premier software solutions product and support package.

In summary, we are confident the group will meet market expectations for 2013 and that our diligent efforts at expanding the scope of our products will result in continued and sustained growth in the future."

[harrogate] 27/9/2013 06:19

Interims out. At first read lots going on but some of it not as expected. Will need to try to work out what it all means ..deals in brand protection sound interesting.

[protean] 26/9/2013 22:28

stewy_18,

yes a copy of the broker note would be much appreciated thanks. Please can you send to [e-mail].

[stewy_18] 26/9/2013 20:50

Protean,

Cash per share is 26 pence.

I can mail you a copy of the brokers notes if you would like.

The $10 million contract is non-re-ocurring and, according to the broker notes, is not expected to generate any profits (see excert below). The key thing is that they deliver the reoccuring revenue contracts, and as yet this hasn't happened. Difficult to quantify the lottery services RNS because there are no figures supplied.

I agree the potential is there and as soon as these contract start coming in SPSY will look very cheap, but don't be surprised if Spectra is still loss making come 2014 financial results.

Over a 3 year time frame however, this will do very well.

Out of prudence, our base revenue estimates assume that sensor deliveries do not
commence until FY 2014, versus our previous expectation of deliveries commencing in the
final quarter of FY 2013. In addition, we have lowered our expectation of the profitability of
the contract, with our gross margin assumption now set at 32% versus our previous (and
historically evidenced) 56%. It is clear that the costs of manufacturing the sensors is likely
to be higher than first anticipated and when Spectra signed the contract for the delivery of
the 311 sensors. Given that Spectra is only part way through the funded development
phase, it does not yet have locked down price on materials and labour costs. Most of the
assembly will take place in house using off the shelf components, however some
components may have to be specially manufactured. Spectra will not therefore have a firm
view of the margin potential until the end of the development contract early next year. As
such we have taken a pessimistic view of the margin and profit potential.

[protean] 26/9/2013 18:24

Does anyone know the forthcoming results date?

It's just about 6 months since the finals.

[battlebus2] 26/9/2013 18:22

Hopefully a little more info will be made available with the AGM on Monday.

[protean] 26/9/2013 18:03

stewy_18 - as harrogate says, the business is valued at close to nil.

Cash per share is 32.71p and the share price is just 34p, barely above cash.



So you're paying just 1.29p for a business which at the last set of results delivered 26% revenue growth and was brimming with confidence for the future:

"The Board believes that the Company has made significant headway in 2012 in achieving key business milestones, that it continues to have excellent prospects and that it will perform strongly in 2013."

Since results the business has announced a significant order worth $10 million (against a market cap of £12.6 million) and the Premier Lottery ICS Services order a couple of days ago.





I would agree with Rainmaker in saying that SPSY is most definitely undervalued.

The downside is protected with a huge cash balance and the upside is significant with a growing business with all of the key attributes mentioned in Rainmaker's earlier post.

[harrogate] 26/9/2013 12:51

The business is valued at close to nil so if they can show that they are not burning cash then we can go higher I would think. The problem with working with Central banks is the lumpiness of the sales. The large order they announced that got us all excited to one bank may not be repeated for 3 + years since they need to keep such high levels of stock at the bank for security reasons so until they get working wiht a few banks it will be hard to get revenue and thus profits going in a nice straight upwards line.

[stewy_18] 26/9/2013 09:57

I wouldn't say it is undervalued. If you look at the brokers notes, they still have a lot of work to do before they are to become profitable. Any contract further contact wins this year will be game changing IMO. The second last RNS was kind of expected if you read the brokers notes. Any further contact wins should tip the balance. Interesting situation. I have taken a small position.

[rainmaker] 26/9/2013 09:46

Imho ridiculously undervalued. For anyone unfamiliar with this with Company, in a nutshell it's a great business franchise, protected by numerous US and international patents with a massively strong balance sheet,trading on a rock bottom rating with terrific growth prospects.I'm not someone to waste others time let alone my own and I discuss very few shares of interest

Regards

[protean] 25/9/2013 09:20

On the way up again. Yesterday's contract news has perhaps got a few people interested.

[protean] 25/9/2013 08:03

No probs Hezza123.

The AGM is in a few days on Monday 30th Sept. And the interims should be very soon as well so those could get price moving again.

[hezza123] 25/9/2013 07:47

I can see no news either, so thanks for flagging up protean. Been a quiet few weeks on the Spectra front but encouraging signs.

[protean] 24/9/2013 14:03

Yes, the contract worth would definitely be nice to know.

This is just the first adoption of the expanded Premier ICS package. Hopefully there will be plenty more to follow.

"With this first adoption of our expanded Premier ICS package, Spectra will supply a state lottery with a secure, high-speed data platform which provides a critical independent role in auditing and securing their gaming platforms."

[harrogate] 24/9/2013 13:51

It would be nice to have a feel for what these contracts might be worth cmpared to the currency side of the business..is it $100k or $1m for example per year. Muts be good news though whatever.

[protean] 24/9/2013 13:47

Yes, very positive battlebus2.

Not through the RNS channel so could be overlooked by a few.

[battlebus2] 24/9/2013 13:44

Great news protean.

[protean] 24/9/2013 13:41

Spectra Systems Wins One Plus Nine Years Contract For Its New Premier Lottery ICS Services

[protean] 20/9/2013 14:01

SPSY has gone for a snooze again.

[glasshalfull] 05/9/2013 13:48

Sorry guys...absolutely no idea where you are getting forecasts from.

WHI are the house broker (of which I am a client) & they have $7.879m Rev & $864k loss pencilled in for 2013, with material uplift in 2014 to $16.591m Rev & $2.004m PBT or 2.9p EPS.

I agree with your sentiment, hold a decent slug & detailed my rationale a few posts back. Appreciate clarification of who has provided the forecast figures you are quoting as WHI are the only broker that have produced forecasts AFAIAA.

Regards,
GHF

[protean] 05/9/2013 12:37

Thanks Rainmaker. As you say, forecast PEs very low.

And good point earlier about the earnings visibility. Their contracts last not just for multiple years, but in some cases for decades. You can't get much better earnings visibility than that.