Journeo could be a ride worth taking

Journeo’s connected systems for connected journeys will soon connect with a higher share price, writes Mark Watson-Mitchell.

Recently, the UK Government announced its £3bn National Bus Strategy as part of its major commitment to increase use of the public transport system.

That should offer this technology provider a substantial market opportunity over the next few years.

Based in Ashby-de-la-Zouch, the £8.24m capitalised Journeo (LON:JNEO) group provides information systems and transport technical services.

Its solutions capture, process, and display essential information to improve journeys in the UK and mainland Europe. 

The company offers CCTV, passenger counting, camera monitoring systems, telematics and driver behaviour, and on-board Wi-Fi systems for buses. 

For the freight and passenger rail markets it provides forward-facing CCTV, track and surrounds, video data retrieval, platform and premises, in-carriage, and pantograph monitoring. 

For coaches and ‘blue light’ vehicles it provides mobile CCTV, passenger counting, driver behaviour, passenger Wi-Fi, infotainment, and associated depot infrastructure. 

It also supplies various passenger systems, including real time and mobile passenger information systems, displays, interactive terminals, watchman, walled browsers, and transport hubs, as well as ticket vending machines and validation units. 

Two main business segments

The group’s first business segment covers Fleet Operator solutions: offering CCTV video surveillance to improve passenger and driver safety, telematics for vehicle and driver performance monitoring, real-time communications for remote condition monitoring and automatic passenger counting.

Its second segment is Passenger Infrastructure solutions: covering the design, manufacture, installation, and management of hardware and software for electronic public transport information systems, in and around towns, cities, ferry terminals and airports which includes smart-ticketing and wayfinding.

Cloud systems

First Bus and Abellio are among leading UK operators taking advantage of the Journeo Transit cloud platform by installing its EDGE branded intelligent gateway on their fleets, enabling them to connect on-board systems to new cloud services.

The powerful and secure Journeo Edge intelligent gateway handles communication between on-board systems, maintaining continuous health checks with components of all connected systems, such as CCTV DVRs and cameras, fire suppressant equipment and even vehicle diagnostic information. 

Bus is the biggest market

The group supplies safety and information systems to bus, rail, rail freight, light-rail and specialist vehicle operators, as well as integrated solutions to enclosed transport operations, at locations such as airports. 

Its solutions tend to be provisioned at a fleet-wide level rather than individual vehicles. The UK bus sector is its largest market.

On the group’s Fleet Operator side, it has some 50 customers and over 3,000 vehicles connected to Journeo’s platforms, helping the business to grow recurring revenue. And you know how I feel about ARR!

Small share capital offers upside

The group has just 8.74m shares in issue, of which Canaccord Genuity Group (13.4%) and Slater Investments (10.3%) are the largest professional holders.

Private holders with declarable positions include R Millington (7.1%), H Bottomley (6.4%), C Stone (5.9%), R Singleton (3.4%) and W Campbell (3.3%).

Recent results

A fortnight ago the group announced its 2020 finals to end-December. They were actually quite impressive considering the massively afflicted transport sector in which it positions itself.

Revenues increased 19% to £13.6m, while adjusted pre-tax profits were £0.3m against a loss of £0.9m previously. Earnings were 3.6p per share (-1.1p).

With the results, CEO Russ Singleton stated that 2021 had started encouragingly, with purchase orders and contract awards valued at £4.2m announced during Q1. 

He went on to note that there is also a rising level of enquiries and sales opportunities in the group’s pipeline, which are now predominantly based upon its own IP, technologies, and software.

Broker estimates

Broker WH Ireland estimates that the current year will see revenues pick up yet again, to £16m, with profits nearly trebling to £0.8m, worth 8.7p per share in earnings.

Reflecting the hopes of higher margin long-term contractual or related revenue streams, for next year the broker sees £17.6m of sales and profits of £1.3m, worth 14.5p in earnings per share.

Singleton states that, “Journeo is now positioned to capture an increasing share of a sizeable, dynamic and growing market. The combination of an increasing demand for our technologies and software with significant government funding, underpins our confidence and ambitious growth plans.”

My View

As the group’s earnings quality improves, then so too will its share price, far above existing levels.

The company’s shares, which were up to 130p in the middle of last month, are now trading at just 94.25p. 

Ahead of the AGM later this month I now set an easy target price of 120p, but I expect them to eventually climb way above their recent peak.