Ticker: NTQ                         Current share price: 37p

MKT CAP: £21.81m            Share Issue: 59m

52-week high: 65.50p        52-week low: 36p

 

COMPANY OVERVIEW

The company is new when it was formed in 2011 by Martin Perry and Raymond Garcia, who were the founders of a successful company called Sondex PLC, which was sold to GE for $600m.

It was listed in the LSE in July 2011and had held two fund-raising for a total of £57m for acquisitions in XXT, also M&R Industries and Pro-Flow (the latter two were combined to form a single entity known as KMS).

The company is currently providing Measurement While Drilling (MWD) Solutions and other products for directional drilling. The Measurement While Drilling solution supplied by Enteq includes directional and other down hole systems, the electronics to control and process data down-hole and the data transmission and data retrieving systems for presentation of data on the rig floor.

Enteq also supplies high quality mechanical components for Mud Motors, MWD and machining for other bespoke designs of down hole equipment.

INVESTMENT THESIS

The company is a new start-up for the successful founders which surprisingly have sold their old company that was also in the drilling business. So here are my bullish and bearish points:

Bullish points

  • The company is cash-rich with over $20m or £12m in their ‘Cash and cash equivalent’ account this is over 50% of their market capitalisation. (P.S. Circumstances may change because the company’s management has suggested they may acquire companies that meet their criteria.)
  • The company is run by competent people that have a wealth of experience in the oil equipment business which was sold to GE for $600m.
  • Made successful acquisitions at reasonable prices meaning they paid no more than 10 times current earnings. But the acquisition of XXT seem to be a bargain as it is a growth company where earnings have grown eight times in the last two years (this growth is obviously unstable in the future but still a good buy at less than ten times earnings for a growth company).
  • Lots of blue-chip institutional investors have participated in the equity fund-raising that includes: Soros Fund management and Ruffer holding a combined 18% of share capital.
  • The company has signed an agreement with HSBC on a revolving credit facility of $15m, to date this remains undrawn. Therefore less chance of further shareholder dilution.

Bearish points

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