SRT Marine Systems – orders now coming through kicking off a massive potential pipeline

The announcement, in the middle of last week, of a contract to supply its commercial automatic identification system (AIS) transceivers to The Panama Canal, follows on from the £40m project awarded by a national coast guard last month to this £80m marine systems group.

These orders could well be pointing the way for an uplift in much needed revenues for the company, which is a global leader in maritime domain awareness products and systems.

The business

Based in Bath SRT Marine Systems (LON:SRT) develops and provides integrated maritime surveillance, monitoring, management and safety systems used by coast guards, fishery authorities, infrastructure and vessel owners for the purposes of managing and controlling their maritime domain.

The varied applications include security, safety, search and rescue, law enforcement, fisheries management, illegal fishing detection and environment monitoring. 

The group’s product uses

Since 1987, customers from around the world have relied upon SRT to provide them with solutions for their maritime monitoring, management and surveillance objectives. The main uses are in security and in the environment.

Security covers the protection and monitoring of national coastline borders and valuable marine assets within sovereign maritime exclusive economic zones, as well as in the prevention of terrorism.

Environment uses include the prevention of collisions, the management of commercial traffic, and search and rescue service for millions of leisure boaters.

Integrated surveillance systems provide intelligence that identify issues and enable effective management and responses.

The company’s solutions cover a range of maritime uses from safety and security to fishery management and environment protection.

Its applications include coastal and territorial water surveillance and security, fisheries monitoring, management and IUU detection, search and rescue, waterway management and aquatic environment monitoring as well as individual leisure and commercial boat owners.

The company serves mariners, infrastructure owners, coast guards, and fishing authorities in Europe, the Middle East, North America, the UK, South-East Asia, and internationally.

The group’s solutions integrate multiple technologies, advanced analytics, innovative digital display systems, logistics and command and control to provide enhanced maritime surveillance, security, safety and management for national authorities such as coast guards and fishery authorities.

SRT has now manufactured over 350,000 AIS products, which accounts for the majority of all AIS devices deployed globally. However, with approximately 26m vessels worldwide, only a small percentage of boats have one installed thus far, so the potential is still massive.

By the end of last September the group considered that its validated systems contract opportunity pipeline stood at some £550m. Securing some of that business is what they are working upon.

Recent Statement

With the early December 2021 interim results CEO Simon Tucker stated that: “Our transceivers business has performed very well and we expect this trend to continue through the second half. Following a period of Covid induced stagnation, system customers have substantially re-engaged during the first half, some with a renewed sense of urgency to progress with their maritime surveillance system plans.

Of particular note are four in Asia and Middle East worth an aggregate of £71m which we are confident will commence during the second half.“

Equity

There are some 164.3m shares in issue. The larger holders include Hargreaves Lansdown Stockbrokers (14.8%); R Persey (9.81%), Simon Rogers, Dir (8.22%), Jonathan Horne (5.45%), David Brierwood (5.35%), Ian & Caroline Laing (4.69%), Barclays Bank (Private Banking) (2.84%), David Newlands (2.83%) and Amati Global Investors (2.34%).

Broker’s View

Analysts Lorne Daniel and Kimberley Carstens at brokers finnCap are probably waiting for some concrete news from the group.

They currently have no estimates out for this year and next. Nor do they have a price objective for the group’s shares – all being ‘under review’.

My View

Just think of the incredible amount of uses for this group’s equipment. Orders can take a long time to materialise and the operating losses can pile up.

However, I have a sneaking hope that come the end of next month the group will line-off another poor year, before recovery starts to show through in the coming year from April onwards.

Yes, I am only guessing I do admit, but the firmness of the share price is almost telling me that something is up.
The group’s shares at 47p are currently trading fractionally below the recent High of 48.5p.

Lowered revenues, operating losses and no broker’s guidance upon valuation – not a lot going for it really.

But my water suggests the opposite. Buying the shares now is obviously a gamble.

My new Target Price is 60p, based upon nothing more than ‘gut feel’.

(Profile 14.09.20 @ 39.5p set a Target Price of 50p*)

(Asterisk * denotes that Target Price has been achieved since Profile publication)