WH Ireland have a new Buy note out and have increased their target price to 34p (from 30p).
They have been EXTREMELY conservative as regards new forecasts - and say so themselves. They've left this year's forecast at 2p EPS, and have raised next year's to 2.4p EPS.
They also forecast £1.4m net cash at 12/18, rising to £2m at 12/19.
They summarise as follows:
"Acquisition of RTS Solutions; FY 2019E earnings raised 14%
Petards supplies advanced security and surveillance systems to the Rail, Defence and Traffic Technology markets. This morning, the Group has announced the successful acquisition of RTS Solutions for a maximum net consideration of up to £1.5m, satisfied in cash alongside a new £1.25m five year bank facility.
The addition of the business not only broadens Petards portfolio of products in the wider rail market but has the added attraction of a high degree of recurring revenue; this at an historic PER multiple of sub 6x. The Board expects the acquisition to be earnings accretive in the first full financial year of ownership. We cautiously assume no impact in our FY 2018E earnings estimate, whilst we raise our FY 2019E earnings expectation by 14.0%, implying the shares currently trade on a lowly FY 2019E PER of 11.0x and 5.5x EV/EBITDA.
Reflecting the change to our forecasts, whilst placing an inline Support Services sector rating to the shares would imply fair value of 34p (previously 30p)."
"Part of these cash proceeds were used to re-acquire shares in Petards, taking the shareholding back to the level we had previously held. These purchases were however at much lower prices than the previous shares had been sold at. The company has just produced a very positive statement and the future prospects look good and the share price has started to recover strongly."
Hybridan have a 35p target price. They go for 2.15p EPS this year, with a closing cash pile of £2.5m.
They note that earnings-enhancing acquisitions are firmly on the table.
The following extract also stresses the potential for large £1m+ contract wins from the rail rolling stock boom from already existing customers:
"The 2018 opening order book of £18m has been maintained and coverage of 2018 revenues from that order book and from the first quarter's revenues has now increased to over £15m. This gives 85% coverage of our FY Dec 2018E revenue forecast of £17.5m (+12.3% year on year). Our PBT forecasts for the same period are £1.2m. The Board has expressed confidence that the 2018 full year results will show further progress over those achieved in 2017.
Petards remains in discussions for major new projects across all areas of the business. We are hopeful that some of these can be converted over the rest of the year although it is likely that revenue recognition would be weighted towards future periods. Further headway has been made with the MOD with the recent
£1.1m extension of an existing support contract.
Investment in new rail rolling stock continues, and there are a number of UK new builds where we believe Petards state of the art rail technology solutions stands a great chance of picking up seven figure orders.
Bombardier, a Petards customer has been awarded contracts for over 1,000 vehicles in total for the South Western and West Midlands Railways. Other major contracts out for tender to train builders include South Eastern (800 vehicles), New Tube for London (3,000 vehicles) and HS2 (800+ vehicles). The good news is that the majority of likely contenders for these tenders are already Petards customers."
The RNS prompted me to do some research, and I bought a little. PEG looks cheap. I suppose there are risks in having loco-makers and the MoD as customers. I won't go on about it because I've only done a few hours research so far.
"The contract extension is expected to be worth in excess of £1.1 million over the two year period to 31 December 2021 in addition to the original contract which was worth in excess of £1.6 million for the three year period to 31 December 2019."
Hybridan have also issued a new note. They go for 2.15p EPS this year, with a closing cash pile of £2.51m.
They summarise as follows:
"Petards ended the year with a strong order book of over £18m, with over £12m thereof deliverable in the current financial year. This has been further augmented by a subsequent £1.5m order from the Ministry of Defence (MOD). Prior to this, defence orders scheduled for delivery in 2018 were almost 40% higher than at
the same stage last year.
2017 was a significant year of investment for the Group, particularly in eyeTrain software and hardware products. Nevertheless, positive cash flow from operations combined with a conversion of all outstanding debt meant that net cash grew from
£775k to £1.3m.
The outlook for the rail division remains strong. Petards has six of the world's largest train builders as its customers. The 2017 edition of the Long Term Rolling Stock Strategy published by leading players in the UK rail industry forecast that the number of vehicles in service will increase by 20-25% in the period to 2024.
The outlook for Petards defence products is positive in the medium to long term as the MOD, encouraged by Brexit, turns to cheaper UK suppliers, and is released from EU competition rules.
Our 2018 forecasts are looking for revenue growth of 12.3% to £17.5m and adjusted EBITDA growth of 17.8% to £1.91m. On a current year EV/EBITDA multiple of 5.8x and PE multiple of just 11.5x, we do not believe the rating adequately reflects the solid niche, that Petards has built in the rail sector which is underpinned
by very solid long-term growth drivers.
In due course we would hope to see Petards grow its product offering in the sector either organically or by acquisition."
WH Ireland, as well as forecasting 2p EPS this year, also forecast that the cash pile will rise to £3.5m by the close of 2019 from £2.5m this year (against a £13m m/cap).
"The order book stood as at 31 December stood at over £18m, providing excellent visibility over the next 18-months, including over £12m order coverage for FY 2018E. Following the results, we have left our FY 2018E earnings expectations unchanged, whilst introducing FY 2019E forecasts for the first time. At current levels, the shares trade on a lowly 11.7x FY 2018E PER and 5.6x EV/EBITDA and we continue to see fair value at 30p."
"Looking forward, the Group is well set for the year ahead with the order book standing at £18m as at 31 December, with £12m for delivery in FY 2018E and £5m for FY 2019E, including Stadler Bussnang AG on the list of customers for the first time. Encouragingly, management notes that the Group is in ongoing discussions for new projects across each of the areas of the business and it was encouraging to see the £1.5m Defence order last month.
The shares currently trade on a FY 2018E fully diluted PER of 11.7x and EV/EBITDA of 5.6x. Given the level of secured work, in addition to the pipeline of opportunities, we believe that these multiples continue to undervalue the business."
PEG's results show them to be in excellent shape for this year, with the £1m deferrals from last year helping towards an impressive order book for 2018 and beyond.
PEG also have £2m net cash, against the £13m m/cap. And PEG will gain a further £130k or so this year with no loan note interest payable.
The Chairman's outlook statement is nicely confident, with new project discussions "across all areas of the business":
""The Group's order book at 31 December 2017 was over £18 million, of which £12 million is expected to be taken to revenue during 2018. We are also engaged in on-going discussions for new projects across all areas of our business, many of which our customers have themselves already been awarded. This coupled with a strong balance sheet provides the board with confidence for the Group's prospects in 2018 and beyond."
Good news today re QRO:
"has also recently been awarded two multi-year framework contracts, the first with Thames Valley Police and Hampshire Constabulary and the second with the Cheshire Police. Both contracts are expected to contribute to revenues in 2018."
With a core £1.62m positive EBITDA, and a good outlook in Rail, Defence and Traffic, prospects look pretty good imo.
"Transport for London is running a £2.5 billion competition to build 250 carriages in its deep Tube programme for the Piccadilly, Central and Bakerloo lines. It expects to award a contract in the autumn. HS2 Ltd is about to launch a £2.75 billion competition for 54 train sets for the London-Birmingham-Manchester high-speed rail network, which it expects to award next spring. Siemens is shortlisted for both as are Bombardier and Hitachi.
There is a fourth bidder shortlisted for both HS2 and deep Tube: Alstom, the French train manufacturer, which is going through a complicated merger with Siemens.
...Siemens is also targeting further future UK train-building programmes, for a project variously known as Northern Powerhouse Rail or Great North Rail, the as-yet unspecified trans-north railway linking the big northern cities and providing faster and more regular services between Leeds and Manchester."
Hybridan have issued a new note today after the contract win. They leave their forecast at 2.03p diluted EPS for this year for the moment, and conclude:
"The shares are trading at just 0.7x current year revenues and circa 10x current year earnings. We believe this remains a significant buying opportunity for a Company we are forecasting to record its fifth successive year of revenue and net profit growth. The orders announced today have further de-risked this
Petards, the AIM quoted developer of advanced security and surveillance systems, announces that it has been awarded £1.5 million in contracts from the UK Ministry of Defence ("MOD") for the provision of communications equipment and services in the UK.
Petards has a long established reputation as a supplier of radio communications equipment together with related engineering services to the MOD and the award of these new £1.5 million projects cover the delivery of radio equipment and engineering support services, the majority of which are expected to be delivered during the first half of 2018.
Raschid Abdullah, Chairman of Petards Group plc said:
"Petards continues to be very proud of its unbroken 18 year relationship with the MOD in this field. We believe that the consistently high levels of customer service through our enabling agreement, together with our independently audited accreditations and expertise in supporting the MOD has again been recognised through the award of these contracts."
Trading statement - PBT to be above expectations.....so likely to be around 2.3p EPS.
Good news is a recovery of £0.7m cash under a settlement. Bad news is that £1m of revenues have been deferred to this year, so that's merely a timing issue and will benefit this year's PBT.
In particular the visibility of revenues for this year bodes well:
"the Group continues to trade profitably and enters 2018 with an order book of £18 million. Over £12 million of this is scheduled for delivery in the coming year and the Board remains confident of the Group's future prospects."
Happy new year to everyone here. Given the outlook in September's interims I'm hopeful that 2017's - and 2018's - results will be good:
"The results for the first half of the year and a strong order book that includes almost £8 million of revenues scheduled for delivery in the second half of 2017 and nearly £11 million for 2018 providing good support for the current year and a foundation for 2018.
"That growth in product development and projects has been financed from its own resources without recourse to shareholders or debt demonstrates the strength of the Group.
"Against this backdrop and on-going customer discussions for new projects, the Board continues to be confident about the Group's future prospects."
Just announced a few minutes ago - Bombardier have won another huge contract to "to supply 333 new rail cars, along with a contract for maintenance work, with a U.K. rail company" - these will be new Aventra trains:
From the rather successful Chelverton Growth Trust's results yesterday - having top-sliced PEG at the peak (which may be largely the reason for the share price fall from the top given PEG's tiny £8.5m m/cap), they've been buying back again more recently.
"The holding in Petards plc was reduced as the share price moved up very sharply and then towards the end of the year the holding was modestly added to at much lower prices despite very positive interim results. Petards plc supplies sophisticated products to the rail industry and is building a very large order book to be delivered over the next two to three years."
From the FT - five firms have just been shortlisted for a huge £2.75 billion HS2 contract.
PEG already work with four of the five, and even the fifith - Patentes Talgo - recently announced UK localisation plans to build a production facility here.....with a localised supply chain:
"Thursday 2 November 2017
HS2 names Bombardier and Alstom among five shortlisted firms vying for £2.75bn trains contract
HS2 has named its shortlist of firms in the race to win a £2.75bn contract to deliver trains reaching up to 225mph for the railway linking the capital, Birmingham, Manchester and Leeds.
The bidders vying for the contract are Alstom Transport, Bombardier Transportation, Hitachi Rail Europe, Patentes Talgo S.L.U and Siemens, and they will now be invited to tender for the contracts which cover the design, build and maintenance of at least 54 trains, in spring 2018."
Talgo unveils localisation plan for the UK, scouts plant locations in Northern England
The company has already visited potential places around Leeds and Liverpool
Spanish train manufacturer Talgo is set to gain a foothold in the United Kingdom rail market and has devised a detailed long-term industrial plan which includes the construction of a plant in the UK and the creation a fully localized supply chain.
Enough time has passed since publication to post WH Ireland's full post-interims views.
They see 2.12p EPS this year rising to 2.31p EPS next year. At 25.25p that's a forward fully diluted P/E of only 10.9 now, and an adjusted EV/EBITDA of less than 6. The order book has increased by 20% to £24m since the start of the year, giving excellent forward visibility:
Interims illustrate good progress; order book +20%
Petards supplies advanced security and surveillance systems to the Transport, Defence and Emergency Services markets. H1 2017A results demonstrate a creditable performance, with growth in Transport and Emergency Services more than making up for a reduction in Defence sales. The order book has increased by 20% since the beginning of the year to £24m, providing excellent visibility over the next 18 months, including £8m order coverage for H2 2017E. Following the results, we have left our revenue and profitability forecasts unchanged, whilst reducing our year-end net cash expectation to reflect the increase in working capital and higher capex in the year. We maintain our Buy recommendation and 42p share price target.
H1 2017A revenue increased by 8.1% to £8.0m, reflecting good performances in Transport, which accounted for almost two thirds of Group revenue, and Emergency Services, offset by lower activity in Defence, albeit with the latter ending the period strongly. The gross margin moved 340bps higher to 38.6%, this reflecting the fact that two of the six major eyeTrain contracts were nearing completion. Administration costs increased by £432k, in part reflecting a full period of costs from QRO, along with higher depreciation and amortisation following increased investment. PBT of £503k was 5.9% ahead of the prior six month period, with diluted EPS moving 3.2% higher to 0.98p. The Group ended the period with a net cash position of £33k (FY 2016A Â£0.8m), reflecting an increase of £1.1m in working capital and total capex of £585k, principally relating to three major eyeTrain orders. Management expects to see positive cashflows from these eyeTrain contracts in H2 2018E.
The order book is reported to have increased by 20% to £24m as at 30 June, with eyeTrain accounting for more than 75% of this and including Stadler Bussnang AG on the list of customers for the first time. H2 2017E order coverage presently stands at £8m, with approaching £11m secured for FY 2018E.
On the back of the results, we have left our revenue and profitability forecasts unchanged. However, given the anticipated working capital and capex requirements, we have reduced our year-end net cash forecast by £0.9m to £0.3m before expecting to see an improvement in H2 2018E. The shares currently trade on a FY 2017E fully diluted adjusted PER of 13.8x and adjusted EV/EBITDA of 6.0x. Given the level of secured work, in addition to the pipeline of opportunities, we believe that these multiples continue to undervalue the business."
Bargain time imho, especially given the high forward visibility, with the MMs screwing sellers on tiny volumes.
Beaufort are positive this morning (didn't get proof-read though!):
"Our View: Petards reported a strong performance for H1 FY2017, continuing its recent progress by winning several contracts for its eyeTrain systems.
In particular, the £4.3m contract secured from Stadler was an important step forward for the Group as it further strengthens its product position as 'system-of-choice' across the industry. Stadler is a well-known, global system provider of train manufacturing and maintenance services, operating in 18 countries with 7,000 employees. It manufactures a wide range of products, including high speed trains, intercity, regional and commuter trains, trams, tram-trains and underground trains.
Successful delivery of the current project brings potential for long-term relationship to roll-out Petards' various products to other vehicles manufactured by Stadler. An addition of Stadler lead to 6 of the world's top 10 rolling stock manufactures now in Petards' customer list, with 4 of which have current projects with the Group (Stadler, Siemens, Great Western Railway and Hitachi Rail Europe Limited).
Post period, the Group also won a £1.0m contract from the Ministry of Defence and £0.5m from Leonardo MW (previously Agusta-Westland). The Group's order book at the period end increased by +20% to c.£24m, of which £8m is scheduled for delivery in the H2 FY2017 and £11m for FY2018, providing excellent visibility.
Petards ended the year with good cash position of £1.5m with no debt, after financing product development and projects from own resources. As such, the Board anticipates positive cash flows to return in Q3 and Q4 FY2018 as existing contracts progress to advanced phases.
The Share have increased by approximately +60% year-to-date, currently valued at FY2017E and FY2018E P/E multiples of 13.0x and 11.9x, having seen its shares fall back in May after its Chairman reduced its holdings (now 3.2% holder). In view of the continue positive progress along with a strong order book, Beaufort retains its Speculative Buy recommendation on the Shares.
Sound H1 results, with prospects good across all 3 divisions and a particularly optimistic outlook:
"It is encouraging that we are continuing to see a flow of new opportunities across all of the Group's target markets with a particular emphasis on the UK rail market which continues to generate a good level of potential new business.
The results for the first half of the year and a strong order book that includes almost £8 million of revenues scheduled for delivery in the second half of 2017 and nearly £11m for 2018 providing good support for the current year and a foundation for 2018.
Against this backdrop and on-going customer discussions for new projects, the Board continues to be confident about the Group's future prospects."
This section also reads very well:
"Several of the new orders for eyeTrain systems have embodied requirements for additional functionality such as automatic selective door opening (ASDO) and driver only operation (DOO) which materially increases the software content of our systems. This is becoming increasingly essential for train operating companies to increase capacity and efficiency within rail networks. Consequently, eyeTrain is establishing itself as a core system for train operators in addition to its role in security, surveillance and passenger and train safety."
Hybridan have issued a new 6 page report on PEG, which concludes as follows FYI:
"Yesterday's new business wins for the defence division, from both a Government agency and a major equipment supplier is a pleasing uptick for a division which was reported to have had a relatively slow Q1. The rail division by contrast has already announced new business wins of over £7m since the year end.
Following a terrific performance in the shares, they have paused for breath somewhat over the last month, down 6.8% and are some 19% below their year high of 38.5p. We certainly see scope for the shares to break back through this level and are confident that our full year expectations will be met.
At current levels, the shares are on a fully diluted current year fully diluted PE of 14.8x. As at 31 March, the order book was £21m with £13m scheduled for delivery this year. Yesterday's orders serve to further underpin our forecasts for 2017 and to establish a foundation for further growth in 2018. The Company has net cash and as such is on an EV/EBITDA multiple of just over 5x."
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