Any thoughts on Zytronic ?

14th Mar '18 by The Phoenix

9 comments 3052 reads

I've been watching this stock for a possible entry point, last market update was for a small miss in forecasts the stock was marked down on the day.

It was off about 3% every day for most of last week on not huge volume the drop off mainly happens normally in the afternoon so I do wonder if a US based fund manager is maybe selling down his/her holding.

It ticks nearly all of my boxes but maybe I'm missing something,

Any thoughts good or negative appreciated

Thanks

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About the Author

The Phoenix

Premium Member

9 comments

Rusty2

14th Mar '18

I sold out last year, growth is too pedestrian for me. Why do you find it attractive?

The Phoenix

14th Mar '18

It still looks cheap to me on forecasts profit to current market cap,14 mil net cash, high operating margin, double digit current ratio, I do agree though that growth has slowed recently but even allowing for that it looks good value to me on other metrics.

Effortless Cool

14th Mar '18

It has a nailed on 5% yield at current prices too.

doug2500

14th Mar '18

I'm tempted too. It might not have much growth but it has good margins, a low PE, especially if you cash adjust it, and a great yield. I still hold.

Rusty2

15th Mar '18

Thanks, some good points there, div is high and it has a lot of cash. I read Paul's last report and he does mention relying on 4 large contracts and the possibility of a profit warning which it had a few years ago. The lack of growth does concern me but I will put it back on the watchlist.

fishmonkey

15th Mar '18

I'm quite bullish about this share. Though what does bother me is that they are sitting on a scrooge mcduckian amount of cash that they are not using to either grow or acquire new business.

I would have been hoping for a special divi really or them to invest it into something useful. Whilst it might be prudent to keep cash reserves they are not putting it to use. IMHO

The stock price does seem to move both higher and lower on the back of no news. The spike in ~may of last year was apropos of nothing other than Robbie Burns buying some and tipping them.

Pros for me are that it is in a area that is very in vogue right now, and they have been growing the divi year on year for a good while and though they are not setting the world on fire slow and steady growth I like.

I can see them being acquired at some point given the M&A stuff that is going on at the moment.

The cons as paul says is that they only have a few clients and if one drops then that could spell a profit warning.

My personal opinion is that we are not suddenly going to go off touch screen tech and even if they did loose a client they could easily get more. Their tech is good.

I hold for now and would buy more on a dip.
That's my feelings for what its worth.

Effortless Cool

15th Mar '18

Agreed, the cash position is getting absurd. At year-end 2017, cash represented over half their total equity.

However, note that the dividend increase in 2016 was 20% and that this rose to 32% in 2017. Further, the Outlook Statement says:

"The current year has started with orders, revenues and trading along similar levels to that of the prior year, which, together with our strong balance sheet and cash generation, provides a sound base for further growth in dividends and shareholder value".

I anticipate dividend growth of 20%+ per annum going forward, so it's a high yielder that is going to get higher still.

Albertos

15th Mar '18

Don't think Zytronic (LON:ZYT) is attractive.

Revenue is static - H2 2016 £11.2m, H1 2017 £11.3m and H2 2017 £11.6m. They are increasing profits by efficiency/ cost cutting but this can only go so far. Dividends can rise more than this because of their cash balance. However, unless they start to grow they will start contract and this game will only last a few years.

I also have the same thoughts about Amino Technologies (LON:AMO) revenue H2 2016 £42.2m, H1 2017 £39.9m and H2 2017 £35.4m.

Unless management do something dramatic, I think both these shares are beyond their sell by dates.

Phil

Rusty2

15th Mar '18

Amino Technologies (LON:AMO) had a nasty profit warning about 2 years which came completely out of the blue, has put me off investing again in it.

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The Phoenix

9 comments

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