However, what was not expected was a warning that profits in the current financial year will be significantly below market expectations. True, capex budgets of oil majors are under severe pressure, but in a pre-close trading update in August (‘Fuelled for strong growth’, 12 August 2015), non-executive chairman Stuart Paton said that although the market is expected to remain tight, with uncertainty about the timing of recovery of the oil price, the board is "increasingly confident about the prospects for 2016 as a number of significant discussions have already, at the request of our clients, been aimed at inclusion of Getech products in their 2016 budgets".
It’s now apparent that despite previous positive guidance from the company, Getech will be unable to buck the industry trends even though by focusing on major contracts with national oil companies (NOC) and signing multi-year contractual commitments with clients, it’s less exposed than other players. This news prompted head of research Eric Burns at W.H. Ireland to slash his fiscal 2016 pre-tax profit forecast from £2.7m to £700,000 and cut his revenue estimate from £10.8m to £10m. On this basis, expect EPS of 1.7p rather than his previous forecast of 6.2p. Mr Burns expects the dividend to be held.
In the circumstances, it's hardly surprising that investors are heading for the exit: shares in Getech lost 14 per cent of their value this morning having closed last night just below my recommended buy in price of 45p when I initiated coverage ('Exploit a share price break-out', 10 Feb 2015), albeit that was well shy of their subsequent high of 65p in April. I would recommend doing the same given the marked deterioration in the trading environment. Sell.
Please note that I have written another article today which includes updates on five other companies.
MORE FROM SIMON THOMPSON...
I have published articles on the following companies in the past few weeks:
■ MS International: Buy at 180p, initial target price 240p ('Making waves', 19 October 2015)
■ Pure Wafer: Buy at 175p, new target 200p ('Valuation anomaly worth exploiting', 20 October 2015)
■ Greenko: Hold at 87p, new target 100p ('Greenko's cash return', 20 October 2015)
■ Elegant Hotels: Buy at 108p, target range 130p to 135p ('An elegant investment', 20 October 2015)
■ BP Marsh & Partners: Buy at 157p, target 180p ('Cash-rich value play', 21 October 2015)
■ Crystal Amber: Buy at 170p; Dart Group: three month trading buy at 468p; Grainger: three month trading buy at 247p; Leaf Clean Energy: await news on Invenergy asset sale ('A quadruple play', 22 October 2015)
■ UTV Media: Buy at 184.5p, target 215p ('On the right wavelength', 26 October 2015)
■ Globo: shares suspended at 28p ('Globo bombshells', 26 October 2015)
■ Globo: shares suspended at 28p ('The truth about Globo', 29 October 2015)
■ Simon Thompson's book Stock Picking for Profit can be purchased online at www.ypdbooks.com, or by telephoning YPDBooks on 01904 431 213 and is being sold through no other source. It is priced at £14.99, plus £2.95 postage and packaging. Simon has published an article outlining the content: 'Secrets to successful stockpicking'
