Srt Marine Systems Share Discussion Threads

[eagle eye] 31/1/2019 15:04

Link to SRT Investor Placing Presentation Jan 2019:

[lavalmy] 31/1/2019 14:53

Hi AE

No, not really, except that I remember a figure of $5-10 per month getting a mention six months or so ago. This $1.25 million a year (call it £1mn) figure was pretty much what Simon told me in August 2017 for the Philo project. That has turned out to be the case (although he didn't tell me how many boats), so I can only imagine that the $5-10 is equally valid still. New satellite capacity should force that down in principle, but the inherent difficulties of the colliding messages mean that they might still be able to command highish prices and pay less to the satellite providers. All the more so as the number of vessels increases, the difficulty increases. Success breeds difficulty!

[buck581] 31/1/2019 14:48

Thanks LaV

[extrader] 31/1/2019 14:44

Hi Valmy,

If we get £200 pa for 30,000 vessels, that's £6million p.a. revenue......and presumably pretty high margin , too ?

What sort of P/E might that income stream command ;-> ?

ATB

[alter ego] 31/1/2019 14:43

Thanks LaV for clarifying the sat data revenue. Do you have a sense of what pure vessel reporting data would be worth?

[lavalmy] 31/1/2019 14:38

I see they have put the presentation up in the investors section. Nothing in it that we don't know. But it does seem that the two big Philippines contracts are worth $200 million together.

[lavalmy] 31/1/2019 14:18

Yes, I have been out and about and come the end of March expect to be so increasingly.

A couple of things to point out, the first being in the broker's note that 'Our FD adj. EPS forecast allows for funding dilution of c.11m shares at the current price of 36p' which is not what happened. 13.4 million at 30p is what did, so they found resistance to the price either because of historical reasons (the Kuwait project was imminent last fund-raising too) or because the recent webcast pushed the price up.

The second major point is that the gross margin has been scaled back to 40% from what had always been 50%. That is either simply being realistic or due to the sales mix changing to include more third party equipment which was always expected to have lower margins.

Thirdly, the broker's note bears little relationship with what SRT is actually expecting and the funding should be seen in the light of what the company is preparing itself for. There seems to be close to a hiring panic going on and it makes one wonder how imminent these projects in the M/E really were historically, particularly that SRT have had a couple of years of further development since they were adamant that they would be coming along and now are scurrying around looking for people to do what they have been promising that they could do. Anyway, it looks like they are all going ahead and in reasonably short order.

The broker does not expect much project work this year bar the £14 million from the Philippines. So whatever projects are announced, they will feed into 2019/20 and the years beyond. As I said at the time of the webcast, the other Philippines projects seem very much to be expected. One is the further expansion of the the IMEMS for the BFAR (the first phase of the expansion is itself in two phases, £28 million and £2 million). The numbers involved in the Philippines seem to vary - in the webcast close to $200 million including the £31 million was mentioned, now £152 million ($205 million) excluding it is mentioned. Either way, the second expansion could be worth up to $100 million but given the way they work it is unlikely to happen until the current project is compete or nearly so. So March/April of next year, but, being the BFAR, we should have tenders out before they want it doing.

Of the other two, one is irrelevant at $5 million. The other one, of up to $100 million (one of the two big ones is definitely $100 million, the other could be $50 or $100 million depending on the including/excluding issue), must be the one that is more imminent for the Coast Guard. Is this the one causing the panic?

The broker's note makes it pretty clear that the real expectation is much greater, £85 million of contribution, with only these six contracts worth £212 million over four years. £10 million of that revenue is already in the 2019/20 forecast which gives 2p EPS. The other £202 yields £81 million from which has to be paid three further years of overheads at £7.5 million less, say, £2 million annual contribution from the non project stuff. £66 million or so over four years, over 43p a share - I haven't included taxes as it is unclear what the actual rate will be. But in the next couple of months, as these come in, the broker will be adjusting upwards towards the 10p area.

AE's point about the satellite revenue is very relevant, but it has to be remembered that £200 per boat per year is not just for tracking but also all the fish reporting. That level VMS style revenue should not be read across to all boats that they may track. Appropriate maybe for the 30,000 offshore Vietnamese boats, but not say a further 200,000 Philippino ones.

[extrader] 31/1/2019 12:53

Hi bucks581,

You shouldn't be : he posted his comments 'early doors' (scroll back to 07:15) and has (presumably) got on with other things since.

ATB

[buck581] 31/1/2019 12:50

I’m surprised LaValmy is not here today.

[kendonagasaki] 31/1/2019 12:33

The ceo is continually pulling your pants down here.Never mind its pays for the new holiday house abroad he is purchasing i hear?

[robward] 31/1/2019 12:33

I note that all this dilution is having a significant impact on the eps moving forward.

AS of 30/05/2018 Finncap were forecasting 3p eps for y/e 2020, now that has been adjusted down to 2p. Dilution has consequences, anyway, I will continue to hold as I'm a bit of a dreamer and hopefully after over 13 years of being a listed company, SRT may actually start to deliver on results.

[alter ego] 31/1/2019 11:09

FinnCap's note is well researched and detailed but overall very conservative as to expected revenues, profits and cash. In the background there is the teaser of the possibility of further contract wins which would make a major difference due to operational gearing but as yet, they have refrained from incorporating that into forecasts. I feel that is the correct stance and shows lessons from previous over optimism have been learned.
Regardless, it is clear that the opportunity is there and that SRT are in a significantly advantageous position to win the additional contract work. It's easy for doubters to pour cold water on the prospects but given SRT's reputation, product capability and long term relationships devoted to understanding the customer and their requirements I remain optimistic as to their ability to succeed.

One element in the note which I have not seen reported before is the expected £1m annual revenue from the satellite data provision under the Philo Fisheries contract. Unless I misunderstood, that works out at £200 per boat. Given the potential number of vessels that SRT may eventually be supplying data for, it's not difficult to see that recurring data revenue could become a very significant number.

[eagle eye] 31/1/2019 10:39

FinnCap have released revenue/eps guidance for FY 2020 in a new 13 page note.
Revenue £30.4m, PBT £3.8m and eps of 2.0p based on existing delivery milestones.

[yupawiese2010] 31/1/2019 10:33

Brokers note link.

[yump] 31/1/2019 10:29

I sincerely hope that the people concentrating on cash and not on the business itself, are not invested at all here.

Wouldn't like them to benefit accidentally while not really following the business itself, rather than the cash.

This is and always was a case of if the projects come to pass, dilution will be such a tiny issue that everyone will forget about it.

So the 'crucial' issue is what is happening project-wise, not working capital, not cash.

As has been said a long, long time ago, if the business has the right credentials, the results will follow. Cash and equity raising is just a means to that end.

It would be a very different matter in a year or so, if like many AIM businesses SRT generated decent revenue increases, but with no increase in profitability. Then cash would be a critical issue.

[buck581] 31/1/2019 10:25

When is imminent?

[kinbasket] 31/1/2019 10:18

Good brokers note. I expect the reason for the delay in the note was because of the fundraising. conservative TP of 75. There's quite a bit of new news today with some flesh on the middle east potential and further philo contracts. Dilution is a ballache but it looks like after years of moving at a snails pace things are suddenly moving very fast. Wouldn't be surprised to end the day up.

[eagle eye] 31/1/2019 10:16

Over the last few years SRT has lived hand to mouth, but with a possible quantum change in business, this is no longer a prudent strategy.
SRT could have increased costs more than a year ago, but would shareholders have been happy with that? I don't think so.
Management are now scrabbling around. If large contracts are imminent, then a 10% dilution to finance additional working capital is sensible IMHO.

[buck581] 31/1/2019 10:10

I should have read you more carefully DJ.

[buck581] 31/1/2019 09:54

I’ve been expecting contracts which were imminent according to the webcast.
Instead we get a placing.
Zero credibility now Mr Tucker. Zero.
I’m sick of the smoke and mirrors.
Your forecasts are those of a gambler not a responsible ceo.

[countryman5] 31/1/2019 09:45

I understand that the brokers note is available, free of charge, on Finn cap's website

[yump] 31/1/2019 09:39

I would like some at 30p please.

[alter ego] 31/1/2019 09:35

Pleased to see a more open approach to what is "in the pipeline". It suggests to me that SRT are more comfortable with the prospects becoming confirmed contracts without the need to cloak everything in "customer confidentiality".

I also see the fund raising as a natural consequence of this confidence that a material ramping up of manpower and equipment supply is required.

Like many here, I have waited many years to taste the jam but it looks increasingly likely we will all have cause to celebrate before long. Accordingly, I took advantage of the slight drop in the share price this morning to add to my already overweight holding.

[2vdm] 31/1/2019 09:23

Agree, no institution is going to dump for a few thousand pounds unless they think the company's heading south.