The last forecasts I saw from Whitman Howard were:
last year : 7.4p EPS, 3.3p dividend
this year : 9.8p EPS, 3.6p dividend
This puts RTC on a current year P/E of 5.7, let alone a 6.5% yield, which seems ridiculously cheap.
You'd be unlikely to ever see RTC trading on racy multiples. However, the SSE contract running until December 2020, plus the rail maintenance work, gives RTC an unusual degree of certainly for the sector, so could see a re-rating to a P/E of say 10 or 11 if things go smoothly.
Re-rating has not occurred.
No action on sp.
Trade volumes some days non existent.
Difficult to build a position of merit.
BOD are full steam ahead with their ambitious growth initiatives.
Look forward to the corporate update in January.
What are latest sp forecasts?
Nearer a £ than 50p
I note this week's news that Trump is sending another 4,000 troops to Afghanistan, and wants other countries like the UK to do more too. The UK is already sending another 85 personnel there. Which is all likely to be good news for RTC's GSS division:
Whitman Howard have issued a new note post-results, with a 95p target price and the following forecasts:
this year : 7.4p EPS, 3.3p divi
next year : 9.8p EPS, 3.6p divi
to Dec'19 : 11.2p EPS, 3.9p divi
With 76% of gross profits (ex DCC) recurring per Whitman Howard, RTC are a completely different kettle of fish than their sector comparators and should be rated at a premium as such - never mind on a current year P/E of only 8.9.
"Award of SSE Plc contract to provide Smart Meter Installers
RTC is delighted to announce that Ganymede Energy, a division of Ganymede Solutions Limited ("Ganymede"), has been chosen by SSE Plc to source, train and provide a minimum of 250 Dual Fuel Installers for its Smart-Meter rollout programme ("the Contract").
The initial term of the Contract signed on 25 July 2017 runs until 31 December 2020 and has a revenue value of £28m which will be realised over the initial term. The provision of Smart Meter Installers will commence in November 2017 with a phased training and deployment plan that will see at least 250 Installers deployed on a full-time basis. All installers will be provided fully accredited but will undertake additional training with SSE to ensure that they maintain the high standards of service and safety expected."
Commenting on the award, RTC Chief Executive Andy Pendlebury said:
'I am delighted that Ganymede Energy has been chosen to partner SSE Plc on this exciting long-term project. This partnership is another significant step for our Ganymede business in establishing itself as the market leading provider of personnel to safety critical environments.
RTC acquired Ganymede Energy (formerly RIG Energy) in December 2014 as part of its diversification strategy for Ganymede and the wider group. Ganymede Energy has performed solidly since its acquisition and under new management the business has built a reputation as one of the UK's most respected suppliers of engineers to the domestic energy and utilities sector. Ganymede Energy's impressive organic growth alongside the existing strength of Ganymede's Rail division with its long-term contract with Network Rail, firmly establishes Ganymede as both an industry leader and a fundamental pillar in RTC's future success strategy.
The Board is extremely proud of Ganymede and the Ganymede Energy team.' "
I attended the AGM. Most importantly, I was reasonably encouraged by what was reported in terms of trading:
- the Chairman was very firm in describing current trading as "satisfactory". IMO the Chairman is of what might be termed the "old school", where there's no need for hyperbole, or for 10 words where one will do. As proven by the trading update!
In other words, if he's happy to describe overall trading as "satisfactory" I would translate that as "good"
- the AGM itself was unilluminating re trading info. However, there was mention in terms of growth catalysts for Ganymede's smart metering business, and for ATA growing as a beacon of quality against other similar-type businesses. And post-meeting I had a discussion regarding smart metering which gave me much more encouragement as to potential future workloads in this area
- the Chairman described RTC as unaffected by extraneous factors in the general economy, presumably because Ganymede and GSS in particular have strong recurring revenues
- the DCC is now basically completed and 100% available for revenue/profit-generation
- GSS is more likely to strengthen rather than weaken in future as regards Afghanistan given the situation there
- I proposed that RTC should proactively get out and present to private investors via presentations at Equity Development, Proactive, Blackthorn Focus, Mello etc. This is what will get some liquidity and interest in the shares, as apart from Oryx and a few others RTC are indeed too small for most institutional investors.
This proposal was welcomed and seemed to be particularly taken on board by the FD.
I would say that actually RTC's business is overall of HIGHER quality than most of its sector rivals. This is due to Ganymede's and GSS's high recurring/contractual income with Network Rail etc.
The smart metering opportunity in particular offers a transformational opportunity to the group. If this results in a long-term installation contract or two similar to Ganymede's Network Rail contract, you won't see the share price for dust given the small free float.
Thanks a lot for that mention, Gretel - it's a very pleasing note.
Incidentally, I'm thinking it might be Whitman Howard and see they have been regularly involved with some company names which many of us are likely to be aware of.
Must confess, this is this first time I have come across their name, so having re-bought RTC, after a brief exit, I'm very happy to read of their numbers.
This should set the cat amongst the pigeons nicely :o))
Their 85p target price would be a nice start, with 73% upside from the current 49p - and still only be a P/E of 11.
this year : 7.4p EPS, 3.3p divi
next year : 8.7p EPS, 3.6p divi
At 49p that's a P/E of just 6.6 and a 6.7% divi yield....
Here's the summary:
"There are numerous reasons to buy RTC. Improved visibility due to its exposure to recurring, higher margin, contracts in the robust UK engineering sector now account for c46% of revenues up from 25% in 2014. Following a strong start to 2017 we forecast adjusted PBT growth of 16%, a ROCE of 19% and a sustainable dividend and FCF yield of 7% and 11% respectively. With a PE rating of just 7x we initiate with a BUY recommendation and a price target of 85p, representing 73% upside."
given the Q3 slowdown and following the strong Q4 recovery.
I calculate 7p adjusted EPS, well ahead of 6p forecasts, adding back the £173k of amortisation.
The 3p dividend is spot on forecasts - a 5.6% yield.
The outlook is strong too, with a positive start to 2017 in all divisions.
Ganymede should continue to thrive with the Network Rail contract, the smart meter opportunity etc. ATA should also benefit from the government focus on infrastructure spending, and GSS is stable with further opportunities. Plus the Derby Conference Centre is now complete in terms of investment, is re-let and better utilised (not sure Derby will get promoted this year though!).
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