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.

Diary: Software Radio Technology

SRT ( Software Radio Technology) is proving a very popular choice in the NFSC (Nicky Fraser Share Competition) over at TMF (The Motley Fool). Capitalised at £28m on a share price of 26.1p, it has £3m cash, a PER of 9.8, and a ROE of 38%. Analyst forecast for 2012 are 2.77p (+25.91%) and for 2013 3.61p (+30.32%).

Software Radio Technology Plc (SRT) develops and provides automatic identification system (AIS) technology and product solutions for the maritime industry. The Company is engaged in the research and development of wireless radio communication technologies and products for the identification and tracking of land or maritime assets.

Here's what the excitement is about:

Much of SRT's business is driven by regulatory compliance (referred to as mandates) which require fitting of AIS equipment within a defined nationally controlled area. The US coastguard are close to making a "rule" (different terminology but same meaning) initially covering 25000 vessels (from memory) all to be fitted in short order. Many other countries like Russia, China, EU, etc. are also likely to generate demand.

There's an extensive thread over on TMF, although the official entry has yet to be posted.