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Making waves

A marine domain awareness communications technology company has landed a major contract and others are set to follow in short order
Making waves
  • Major £40m contract award to be delivered over two-year period
  • Three other contracts worth £31m likely to be signed before 31 March 2022
  • Potential for three contracts worth £54m set to be secured in coming months

Aim-traded SRT Marine Systems (SRT:47p), a global leader in AIS, an advanced identification communications technology used to track and monitor maritime vessels, has been awarded the first of four systems projects in its near-term validated sales pipeline (all in South East Asia and Middle East), which combined are worth £71m over a two-year delivery period.

The contract from a national coastguard is worth £40m over two years for the installation of a national scale marine domain awareness (MDA) system that will track, monitor and manage all maritime activity in their territorial waters in real time from multiple command centres across the country. The system incorporates a range of sophisticated functionalities such as vessel information and identification, and AI analytics that automatically detect, alert and categorise suspicious and illegal activities.

The other three contracts (worth £31m in total) are all expected to close before the 31 March financial year-end. SRT’s chairman, Kevin Finn, also notes that three other contracts worth £54m (two in the Middle East and one in Asia) have “unexpectedly progressed and could materialise during the current financial year”. These potential contracts form part of SRT’s validated systems contract opportunity pipeline which has an aggregate value of £550m.

Importantly, the group is well funded for the accelerated project roll-out. Net debt of £5.4m includes a low-cost £2.2m bank loan (2.84 per cent interest rate), and SRT has drawn down £5.3m from a £20m secured loan note programme. Upfront payments on new contracts and further milestones on SRT’s flagship Philippines project (installation of monitoring systems, coast stations, vessel transceivers and satellite data feeds) will boost the group’s cash position.

House broker finnCap plans to relaunch forecasts once the other contracts in the near-term pipeline close, but I maintain the view that SRT could be making annualised revenue of £50m in calendar 2022 through a combination of transceiver sales (annual revenue of around £8.4m) and MDA systems contracts. Based on a gross margin of 40 per cent, and factoring in annual fixed overheads of £8m, the ramp up in revenue could deliver annual pre-tax profits north of £10m, a hefty sum for a £79m market capitalisation company.  

I last rated the shares a buy, at 37p (‘Set fair for a profitable voyage’, 29 July 2021), and can see material upside beyond my 55p target price, assuming the other six near-term contracts (worth £85m) are landed, as seems highly likely. Buy.


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