Getech's record contract raises chance of upgrades

Getech has continued its recovery from two big profits warning since February after winning its biggest ever contract. A $5 million (£3.1 million) deal with the Angolans gives confidence in the full-year outcome and a dramatic re-rating is already underway.

The geosciences company will receive the money from Angolan national oil company Sonangol to manage oil and gas exploration and production in the country by working in its geological basins.

"The work involves a wide range of Getech's skills including gravity and magnetic data interpretation, structural mapping, plate modelling, depositional modelling, palaeogeographic reconstruction and palaeodrainage analysis," it said.

With work starting immediately, Getech reckons that most of the income will be recognised in the current year. But because this is such a big job, Getech may have to turn down other work. We're only six weeks into the new financial year, too, and with contract visibility limited, broker WH Ireland keeps its forecasts unchanged. It currently expects pre-tax profit of £2 million in the year to July 2015, giving earnings per share (EPS) of 5p.

"We have observed before that it is difficult to place a value on GTC's substantial embedded knowledge of worldwide hydrocarbon systems amassed over the company's 28-year history," it explains. "It is prudent to keep our powder dry until later in the year."

It is, however, optimistic that after a series of earnings downgrades, there is potential for the firm to enjoy multiple upgrades in the year ahead, much like in 2013 where the broker bumped its ratings up three times in six months.

WH Ireland reckons a fair valuation for the firm is 14 times 2015 EPS forecasts, which works out at 70p, up from 60p previously. That's useful guidance should Getech find the capacity to win and take on other chunky contracts.

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