Transense Technologies – Sensing The Time Is Right To Buy

Before the end of next month Transense Technologies (LON:TRT) will be reporting its final results for the year to end June – they will be good.

The Oxfordshire based group develops and supplies advanced sensor technology and measurement solutions used by some of the world’s leading companies to improve performance, efficiency and safety in demanding, mission critical applications. 

Finals Due Soon

It is estimated by analyst Ian Jermin at the group’s NOMAD and Broker Allenby Capital, that its 2023 trading year will show revenues over 35% higher at £3.5m (£2.6m) while its adjusted pre-tax profits could be more than quadrupled at £1.17m (£0.27m), taking earnings up to 7.9p (5.4p) per share.

What is more the current year now underway could see sales rise almost 27% to £4.55m, with profits lifting another 44% to around £1.68m, hoisting earnings to around 11.5p per share.

The Business

Transense currently operates through two active business segments: SAWsense and Translogik.

SAWsense – designs, supplies and licences advanced sensor solutions based on proven, patent protected Surface Acoustic Wave technology to world leading companies in aerospace, electric motors and drives, industrial machinery (including robotics) and motor sport.

Key customers include GE Aerospace, Parker Meggitt, McLaren Applied and several other confidential Tier One automotive and aerospace suppliers.

Translogik – develops smart, connected commercial vehicle tyre inspection equipment to many of the world’s leading tyre suppliers, fleet operators and service centres.

They accurately measure and digitally capture safety-critical tyre condition data, which is used to reduce operating costs, improve safety and provide audit records for regulatory compliance.

Key customers include Bridgestone, Goodyear, Continental and Prometeon (Pirelli), and leading independent providers of vehicle fleet maintenance management software.

It is also worth noting that the group earns residual royalty income from iTrack – which is a tyre monitoring system for off-highway vehicles that was designed, developed and supplied by Translogik and sold under subscription to leading global mining companies.

In June 2020, the associated sales, support and development infrastructure were sold to Bridgestone Corporation Japan, the world’s largest tyre producer. However, the intellectual property was licenced exclusively to Bridgestone under a ten-year deal expiring in 2030.

Sales and Regions Per Business

On a sales per business basis the iTrack Royalties made up 59.2% of the 2022 turnover, while Translogik was 33.2%, with Surface Acoustic Wave representing 7.6% of the total.

On a sales per region basis the UK and Europe took 59.2% of group revenues, Eurpe 14.7%, North America 12.3%, Australia 1.6%, and the Rest of the World 7.6%.

The Equity

There are some 16,146,411 shares in issue.

Larger holders include CriSeren Investments (10.36%), Harwood Capital (5.15%), Javed Abrahams (3.66%) and Chairman Nigel Rogers (1.61%).

Broker’s View

Following the early July Trading Update from the group Ian Jermin stated that Allenby Capital was pleased to see progress continuing from the group’s income streams and further details are expected to be revealed with the full year results in September.

My View

The group’s brokers have previously rated the group’s shares as ‘undervalued’ and I totally agree with their view.

On Friday night they closed at only 87.5p, at which the group is capitalised at some £14.1m.

Trading on just 10.7 times price-to-earnings historic and 7.6 times current year – a far too low a rating for such a technology advanced group with excellent growth prospects.

I stick firmly to my Target Price, suggesting that the shares are a strong hold for existing shareholders and a bargain for new investors at the current price, especially ahead of the September finals announcements and Update.

(Profile 17.09.21 @ 102p set a Target Price of 127.5p)