RF Into Space And Burritos Set To Blast Off

Filtronic (LON:FTC) – Progressively Spacebound Join The Flight

Filtronic, which has been at the forefront of RF communications for some 45 years, serves several distinct markets with advanced RF communications equipment, with the main applications being mobile telecommunications infrastructure, critical communication networks and aerospace & defence.

In addition to those terrestrial applications, the group is also seeing increasing opportunity for its technology in stratospheric and low earth orbit (‘LEO’) space applications.

It operates from 3 global manufacturing sites, with 2 engineering centres of excellence covering the full RF spectrum.

The £147m capitalised group’s product range and wider technology capabilities are supported by its own IP and in-house knowledge, and it has the protection of an extensive patent portfolio.

In Aerospace & Defence its products are at the cutting edge of radar and electronic warfare technology.

For Telecoms Infrastructure it enables the transfer of big data back into the core network, which is essential for 5G networks.

Its Critical Communications side facilitates reliable, accurate voice and data communications for emergency responders.

While its increasingly important Space specialist division provides high-performance transceiver modules, enabling ground to space and inter-space data transmission.

CEO Nat Edington stated that: 

“The space market continues to present significant growth potential for Filtronic.

The recent Strategic Partnership we entered with SpaceX is exciting for all of our stakeholders.

It gives a platform to develop the business and puts us in a stronger position to capitalise on the plentiful opportunities in the core markets we serve.

We enter the new financial year with a very strong order book, a growing list of customers, including key strategic targets that we have secured in the year, and an opportunity pipeline that continues to grow and mature.”

After the recent Trading Update analysts Edward Stacey and Kimberley Carstens at Cavendish Capital Markets jacked up their Price Objective for the group’s shares from 57.4p to 91.9p per share.

The company’s guidance gave them confidence in doing so, impressed by the SpaceX business.

For the year to end April 2024 they are estimating revenues of £25.4m (£16.3m), while adjusted pre-tax profits could be £3.6m (£0.1m), lifting earnings up to 1.4p (0.1p) per share.

For the year now underway they go for £36.0m revenues, £6.4m pre-tax profits generating 2.7p per share in earnings.

Over at Edison Investment Research analyst Katherine Thompson has fairly similar estimates out in the market.

Stating that the group had benefited from strong demand from the space market, she expects that to continue into FY25.

The analyst noted that the company had confirmed that it has ramped its production capability to meet this higher level of demand and continues to invest in further capacity expansion to provide flexibility and support for future growth.

Furthermore, she concludes that the relationship with SpaceX, as well as growing penetration of the aerospace and defence market, provide avenues for sustainable growth.

The group’s shares closed last night at around 67p, some 7p lower than their recent 74p peak.

There is a growing momentum behind the shares, with dealing volumes on the increase, which is always a good sign.

I now see 80p being a new and easy Target.

(Profile 04.02.22 @ 11.6p set a Target Price of 14.5p*)

(Profile 04.01.24 @ 21p set a Target Price of 24p+*)

(Profile 26.06.24 @ 67p set a new Target Price of 80p)

Tortilla Mexican Grill (LON:MEX) – A Very Taco Move Into Europe Just In Time For The Paris Olympics

Yesterday’s announcement that it has acquired, for €3.95m, Fresh Burritos, the second largest fast-casual Mexican restaurant group in Europe, and the largest in France, looks to be a very sensible move.

It was interesting to note that, straight after the acquisition announcement, four of the group’s Directors picked up more stock at around the 53.5p level.

Fresh Burritos operates from an estate of 13 owned company stores, situated in prime positions in leading French city centres including stores across Paris (such as Gare du Nord, Bercy and Belle Epine), Nice, Nantes, Grenoble and Strasbourg, as well as at some of the best shopping centres in France (such as Val D’Europe and Carré Sénart).

The company is now looking to develop its brand across Europe, while also pushing its franchise operations internationally.

Despite being only capitalised at £21m Tortilla is more than twice the size of its nearest European competitor and it believes that it is therefore poised to lead the growing burrito market in Europe.

CEO Andy Naylor stated that:

“Tortilla’s international ambitions are no secret, and acquiring Fresh Burritos is our gateway to mainland Europe.

With Mexican cuisine surging in popularity, these prime French locations give us a solid launchpad.

We’re set to leverage this acquisition, just in time for the Paris Olympics!

We’ve assembled a top-tier European team to navigate this new market.

The brand synergies are clear, a new central kitchen is in the works, and our dedicated team is raring to go.

We’re primed for sustainable growth abroad!”

The core UK business is trading in line with the Board’s full year expectations, while it expects to issue a market update on its H1 2024 performance next month.

Analyst Anna Barnfather at Liberum Capital rates the shares as a Buy, looking for them to more than double from their current 54.5p to 115p in due course.

This time last year its shares were trading at nearly 95p – however, now they are creating strong attractions as the group develops across Europe.

(Profile 06.06.24 @ 52.5p set a Target Price of 65p)

(Asterisks * denote that Target Prices have been achieved since Profile publication)