Tuesday, January 10, 2012

SRT: Software Radio Technology

I have been eagerly awaiting a write-up of SRT for the share competition on TMF. Fortunately, BobHellen has now made his submission. Maybe one day I will be able to write an investment case as good as that - but not today. SRT has garnered a lot of "second choices", and I think he's picked a live one. Just to try to provide a short summary of his excellent post ...

SRT is a profitable company with cash in the bank selling AIS (Automatic Identification System) equipment into the marine market. It has a commanding market share (c.80%) and cutting edge products that have few equals. What it sells is an indispensable tool which has numerous applications and which is set on an upward growth trajectory unaffected by the latest fashion or trend. The market for AIS is still embryonic and sales are lumpy. At 26p the market forecast p/e for y/e March 2013 is 6.5 based on earnings growth of 32% over the current year forecast. Its market is largely driven by regulation and will increasingly become more non-discretionary. The potential size of the eventual market dwarfs anything seen so far and SRT is well placed to take a very large slice of the pie even if so far unidentified competitors do emerge.
 The two big "cons" appear to be lumpiness in sales, and the declining price points of some of their products.
As regards the unpredictability, commenters have noted that "the market hates uncertainty". Of course, what the market hates, it de-rates. I don't own any shares (at least not yet), but I admit that I'm getting the warm tinglies on this one.

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