Srt Marine Systems Share Discussion Threads

[dieseltaylor] 12/10/2016 11:41

If you are in the field of mandatory equipment and you happen to be the tech/product leader things should be pretty safe. Provided of course you do not over-extend or price too cheaply.

I am trusting the Directors on that sort of detail : )

[boadicea] 10/10/2016 20:05

It's very difficult to value a share that could ...
1) be the subject of a takeover bid tomorrow
2) require an emergency cash call (or go bust) within a year
3) soon land a series of contracts putting it on a potential p/e of ~1
4) experience any combination of the above.

OK - I'll admit that's a rather provocative and broad brush analysis but readers will probably understand the scale of the unknowns in relation to the future of SRT.

Currently the share price is almost entirely an optimism barometer and the present level says much for the durability of hope over experience.

[yump] 10/10/2016 14:17

It was an oblique reference to these arbitrary share price levels that only mean something because our brains seem unable to cope with processing some other price.

[eagle eye] 10/10/2016 13:00

yump, Its still a very big move since March.
If you look to double your money every 4 years (IRR 19%) or every 3 years (IRR 26%) and you achieve that in 6 months, then I think the share price warrants a breather.

[yump] 10/10/2016 10:58

Its actually quite disappointing to see the human brain, after all its evolution, ending up generating a share price half way between 40p and 60p.

Reminds me of that quote:
"We wanted flying cars, instead we got 140 characters"

[eagle eye] 10/10/2016 09:27

More keen buyers this morning following Friday's strong share price rise.
Early doors 47-48p +3.5p.
Hopefully current strength is an omen for happy days ahead :-))

[lavalmy] 06/10/2016 15:32

Papy

A good point when talking about complex, long-term contracts in general, but I don't think it affects SRT that much. I am qualified as a Chartered Accountant as an aside.

If you remember the Indonesian deal, Phase 2 would not start until and unless Phase 1 had made the customer happy, yet all the revenue was recognised, somewhat hastily, last FY. Where it might get complex on the revenue recognition side is when SRT are bundling all sorts into one contract with an overall gross margin. Some deliverables might not actually deserve to be recognised at a high GM, but it will all come out in the wash.

In any case, it will not be necessary for SRT to calculate % completion, cost, margin, less reserve as they go along, and have large WIP balances with corresponding deferred income etc. The contracts will be lumpy and revenue recognised when product is shipped.

[papy02] 06/10/2016 15:15

I've not spoken to SRT, but based on the more dubious privilege of speaking to many accountants in my working life:

For a complex system like an MDM sytem + ais transceivers, a "deliverable" might be "passing Phase 1 customer acceptance test".

Until this is "delivered" the accountants may not allow revenue recognition, even for stuff that has been invoiced and paid for.

Simplistically this might apply for anything where there is a material risk of the revenue having to be reversed.

Whether that would include simple shipments of identifiers etc, as part of a system solution sale, would depend on how the contract is structured (i.e. Would the customer be lumbered with that kit even if the overall solution fails the Customer Acceptance Test).

More predictable risk (eg of return of a small % of h/w as faulty) would be handled by deducting an appropriate reserve off the invoiced revenue prior to revenue recognition.

Its possible ST is on a painful learning curve about revenue recognition on complex contracts.

[lavalmy] 06/10/2016 14:55

Do buffoons give monkeys?

[buffythebuffoon] 06/10/2016 14:45

I'm so glad I sold out at just under 52p. This has always been a jam tomorrow stock, and now, when a large contract has been announced, there is no information about what payments will be made or when and they have made a half year loss.

There are always big deals around the corner.

The directors seem happy though...

Buffy

[lavalmy] 06/10/2016 14:24

I certainly don't want to know each time they send a torch out to Bahrain!

Revenues would have to be 'significant' to reach the full year estimate - £9.3 million in six months is historically huge. I hope they get that but not too much more, as anything that can drop into next year will help to amplify what I expect in any case to be large profits. As an example, £5 million shifted into next year would add say 1.5p to the EPS. If that is added to my 10p, then £1.50 looks very likely. OTOH if it drops into this year, EPS for this year would be 2p, yawn!, and next year only 10p, all boxes, so closer to the £1 end.

[the prophet] 06/10/2016 14:11

obiterdicta, you are correct!

[the prophet] 06/10/2016 14:10

I have spoken with SRT to seek clarification on what is meant by a 'deliverable'

Basically, as we know, all the projects have multiple phases, and within those phases are multiple components.
SRT are very conservative in their revenue recognition policy, they do not recognise the revenue till whatever it is has been done, delivered and invoiced.
Each component is a 'deliverable', and deliverable = invoice which = revenues.

So clearly SRT are expecting significant revenues in H2.

That is my understanding, but please and , as ever, dyor, posted in good faith.

Just another point, SRT are limited in what they can say re countries and what stage they are at as, understanably, there are confidentiality issues and security issues that they have to adhere to.

I think all will become a lot clearer as H2 progresses, and the 'will' in the last paragraph is definitely not a throw-away word!

[obiterdicta] 06/10/2016 14:09

I took deliverable to mean deliverable under a contract. Therefore reporting to the market when a phased deliverable has been, err, delivered. OD

[alter ego] 06/10/2016 13:56

Like others, I have been puzzling over this obliquely worded update. The fact that it uses words like "material progress" and "significant project deliverables" suggests important monetary value to SRT but stops short of saying so. I interpret that as meaning a deliverable could be an important stepping stone to securing a contract but might not result in immediate revenue.

The statement also mentions several projects, so that must mean at least three. We know a project is something that SRT list as an item in their VSP so work on it can precede a formal contract or order. We also know Indonesia is in progress and stage 1 completion must be close. Bahrain might be another with the anticipated upgrade to a full MDM system which was in the "project evaluation" stage (another deliverable?) at the time of the AGM. Saudi, I think, awaits a formal tender the results of which would be considered a "deliverable". Ecuador has been expected to come to fruition sooner rather than later and was "at final proposal stage" at the AGM. Is that another of these "significant deliverable(s)"? Whether these deliverables will result in significant revenue this year is an unanswered question. If not, then next year must be loaded.

Any or all of these plus a few that I haven't listed could be what SRT are talking about. The confidentiality about naming countries doesn't help investors make sense of it all so we are left with reading between the lines and trusting SRT not to mislead us.

Frustration is understandable but, I can't help thinking that the use of the words "several", "material", "significant", "completion" and "will" are all designed to reassure that the train is still on the tracks. Waiting for it to arrive without a timetable is the problem. Having waited 6 years, I guess I can wait bit longer.

[lavalmy] 06/10/2016 12:54

Thanks TP.

It looks like my double digit EPS for next year and beyond is still on the cards.

As I see it the broker is being a bit naive in thinking that SRT will ever be able to give an accurate forecast, and, more importantly, that serious investors will actually give a hoot about that as long as several projects are on the go. A couple more signed for say $50 million in total will do the job. It gives the rest of the pipeline that much more credibility. And keeps us very happy waiting for the elusive recurring revenues, which, as we know, depend on the volume sales of Identifiers first.

I stick with my prediction of 10+p EPS next year and, as that becomes apparent, a share price of £1-1.50 by the end of the next March, in which range it is likely to stay for a year or two.

I think the stuff about 'deliverables' probably refers more to hubs, radars, CCTV and base stations etc. Only the last is made by SRT.

[the prophet] 06/10/2016 12:40

LaV

no forecasts yet for 17/18, on that subject the note says

'.....the opportunity for SRT remains substantial. Translating that into firm orders and providing guidance on phasing and therefore forecasts for FY18 and beyond will be key to share price appreciation'

[martinthebrave] 06/10/2016 12:13

Bought in here a while ago and with hindsight 6-12 months too early. That said, quite a few wheels will have to fall off this particular vehicle for it not to be trading higher in a years time. I am happy to wait. I would add that this is an above average quality board for ADVFN which always helps. Good look to one and all.

[lavalmy] 06/10/2016 12:06

TP

Have they got a forecast out for 17/18?

[kalkanite] 06/10/2016 12:05

TP

Thanks for the broker update. The RNS this morning was quite honestly poorly written/nonsense hence the confusion.
The brokers I feel were aware of this and have filled the gaps re the confusion, they will have had communication from ST.

Given the update, I think we are where we left off from the AGM but further up the road in time scale. Timing of orders still being the unknown here.

[the prophet] 06/10/2016 11:51

ps
I feel the last paragraph is a slight error from the brokers, and mandated revenue is now included in with 'core' business, so 'core' is now defined as 'core + mandates'

Small point, but would be nice for house broker to get it correct?.....

[the prophet] 06/10/2016 11:49

A few bits from the house broker's note issued this morning

'The statement suggests there has been progress on a number of projects out of
the $200m opportunity pipeline with several expected to reach the deliverables stage
during H2. Until such time as the company announces the scale of these deliverables, we
leave forecasts unchanged but the assertion on H2 gives us confidence in maintaining
our FY17 forecasts of £700k PBT on £12m of revenue. We retain a Speculative
recommendation and, in the absence of new forecasts this morning, a 40p price target.'


'Why are we leaving forecasts unchanged? An obvious question, given that 75%+ of
our full year revenue forecast needs to be achieved in H2. In the absence of any new material information on the rollout of key projects, this represents nothing more than our “best guess” at this stage and we therefore flag a greater-than-usual forecast risk. On the upside, the major €90m Asian agreement announced in March may start to gain substantial traction in H2; on the downside, large projects are typically delivered in phases over a number of years and the exact timing of each phase is difficult to accurately predict.
Simplistically, our £12m FY revenue forecast comprises roughly half “core” business
leaving £6m of project/ mandated revenue'

[the prophet] 06/10/2016 10:50

sorry LaV, I put 'week' instead of 'month', have now amended my post, thank you for pointing it out.
Cheers for your view on the 'completion of significant project deliverables', we've had at least half a dozen views on that one, all different!

[the prophet] 06/10/2016 10:45

Looking at the figures a little closer:

£2.7m revs, assuming 50% margins, means £1.35m gross profit, so overheads were around £2.5m in the first half.
I expect that overhead figure to nudge up as SRT are and have been taking on additional project suport staff.

let's say overheads are c £5.5m this year.That requires £11m of sales (at 50% margin) to cover overheads and break-even.
It is pretty clear that core/mandate aren't going to provide much more than a useful £5m a year. On that basis SRT need a £6m project every year to break-even. To look interesting, I guess SRT need to be doing more like £20m+ a year, which would provide pbt of around £4m, more in keeping with a company that is currently valued at just over £50m.
With an order book of £70m and a VSP of £200m, £20m and much more should be very achievable.