BULL POINTS
• Robust demand for computer boards
• Stable and visible revenue stream
• Decent dividend yield
BEAR POINTS
• Concurrent has suffered from demand constraints
• Weakening economic conditions could hit performance
Concurrent Technologies manufactures computer boards for computers in the telecommunications, transportation, aerospace and defence sectors. Indeed, its products are of sufficient quality for the European Organisation for Nuclear Research to have incorporated them into the computers used on its new large hadron collider project.
The group's contracts are also long term, spanning up to 10 years, and involve Concurrent delivering a fixed amount of boards over an agreed period. Revenues are recognised upon delivery, which also provides for strong visibility and, with the group's half-year figures earlier this month, management confirmed that the order book remains healthy. And, with 53 per cent of sales going to the defence sector, and with 33 per cent going to telecommunications, the business looks stable.
CONCURRENT TECHNOLOGIES (CNC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 37p | MARKET VALUE: | £26.5m | |
| TOUCH: | 36-38p | 12-MONTH HIGH / LOW: | 44p | 27p |
| DIVIDEND YIELD: | 3.5% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 11p | NET CASH: | £3.9m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2004 | 7.09 | 0.21 | 0.29 | 0.50 |
| 2005 | 10.7 | 1.45 | 1.59 | 0.75 |
| 2006 | 12.5 | 2.29 | 2.42 | 1.00 |
| 2007 | 10.6 | 2.43 | 2.62 | 1.20 |
| 2008* | 12.5 | 3.00 | 3.40 | 1.30 |
| % change | +18 | +23 | +30 | +8 |
Normal market size: 2,000 Market makers: 4 Beta: 0.6 *Brewin Dolphin estimates | ||||
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The group's half-year figures also confirmed that demand remains robust within the sectors served by Concurrent. Indeed, perhaps the group's biggest challenge has been expanding its engineering capacity to cope with that strong demand. However, that problem has now been addressed with the opening of a new design centre in Bangalore.
With the Bangalore plant ready to help tackle demand constraints, acquisitions aren't on Concurrent's agenda for now. But that leaves the chunky cash pile available to help support dividend payouts - the dividend is forecast by broker Brewin Dolphin to rise to 1.4p by 2009, suggesting a prospective yield of 3.8 per cent.
Still, weakening economic conditions need to be kept in mind. Management say that there has been no discernible effect so far on its business from the economic backdrop. But analysts at Brewin Dolphin are more cautious about the outlook and, following the half-year figures, the broker reduced its revenue forecasts for 2008 by £1m and its pre-tax profit estimate by £200,000.
