Are we there yet? SRT

9th Jan '19 by alterego

12 comments 2548 reads

I've been invested in SRT Marine Systems (LON:SRT) for 8 years but it feels more like 16. The company had so much potential when I first bought stock but the early promise of growing sales of AIS transceivers to satisfy national mandates around the world never achieved lift off. "Jam tomorrow" became the familiar jibe of those who doubted SRT would ever make it big. No one has ever doubted Simon Tucker's persistence, eternal optimism and charm but even Paul, who once took a stake, gave up and moved on.

Today, SRT is a completely different company from the one I found back in 2010. Then it was basically a box shifter, trying to sell lots of high-tech tracking devices to boat owners many of whom really didn't want to pay for them. The underlying business model was fine. Design the product to be the best in the market, outsource the manufacture, sign up dealers across the globe who would do most of the marketing and the product would sell. It did sell but not in sufficient numbers to grow the business.

A sea change occurred in October 2013 with the acquisition of GeoVS for £955k. At that time GeoVS which had been spun out of the University of South Wales had 3 employees and had developed a display system that was ready to be sold commercially. Crucially, this software had the ability to fuse data from AIS transceivers, radar and marine maps to create a 3D visual representation of the environment in which vessels were moving.

SRT had seen the potential to exploit the data being generated by countless AIS transponders to create a system through which coastguards, port authorities and fisheries could see what was happening in their field of interest. Now SRT could become a supplier of complete maritime systems not just a supplier of one of the components required to manage the environment. This would be important in a world where fisheries management and countering terrorism were becoming as essential as simply managing the movement of vessels around the coast.

One of the things I always liked about the company was the relentless focus on product development. Gradually, new versions of the basic product architecture appeared. These provided a top of the range transceiver aimed at ocean going vessels,…

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extrader

9th Jan '19

Hi alterego,

Not as long-suffering a shareholder as you, but nevertheless....

Thanks for what seems a very 'unrampy' write-up that accounts succinctly for the SRT back story and why we may be about to turn a corner....and open that damn jam jar (in joke !).

My only observation is that I believe the third ME country is Kuwait, not Qatar (given local politics, the latter may be 'off-limits'...)

ATB

alterego

Thanks extruder for the correction. My notes say Kuwait so writing Qatar was an aberration. Have edited the original to avoid confusing anyone else.

Hi alterego,

Thanks for this ! SRT is obviously - from the lack of other comment on your excellent (confirmation bias anyone ?) article - still below people's radars....

I'm OK with that.

ATB

cig

10th Jan '19

Don’t you fear that the Chief Exhuberant Optimist will squander the incoming cash flow (if any) of the current projects on the development of an Intergalactic Spaceship Monitoring System (ISMS) for sale to a distant civilization of dubious creditworthiness?

(More prosaically I have trouble understanding the point of illegal fishing monitoring using AIS, surely the boat owners will wise up to it and switch off, jam or relocate the transponders.)

cig, as I mentioned above, it's not just AIS that allows authorities to monitor who is fishing or just present in their waters. Radar can detect a vessel and if it's not transmitting its AIS signal which tells you the identity of the vessel, it raises the suspicion that they are trying to hide. Fusing data from different sources allows more targeted surveillance.
If it really was simple to evade detection by turning off AIS why would anyone want a monitoring system?

mmarkkj777

I've had a look at the share, as I'm on the lookout for bargains breaking out (aren't we all :-) ).

It seems to me they have a good product and a good market, but they just don't ever seem to make a profit.

The share price is basically half way between its previous highs and its previous lows. Its debt is more than 3.5 times its assets (with no profit).

So, for me, it would be a flip of a coin punt and the market is too volatile for the risk. Just my thoughts.

15th Jan '19

If anyone is interested in seeing the capabilities of the new system SRT are installing in the Philippines, there's a short video here https://vimeo.com/306772959

Catch reporting is a key component that allows authorities to ensure only permitted vessels are fishing or to enforce quotas and satisfy export markets' need for evidence of the source of imported fish.

31st Jan '19

SRT Marine Systems (LON:SRT) have today announced the raising of £4m via a placing at 30p
"to support the delivery of existing contracts, accelerate the development of coast guard specific functionality of its systems and additional working capital."

This reinforces the recent news flow about the imminence of further contract wins and part of the monies raised are intended to pay for the additional staff required to project manage the implementation of these projects. The reference to "coast guard specific functionality" refers to features of the GeoVS software which is central to the monitoring of vessel movements.

Also today, FinnCap have published a broker note which is free to view if you register. See https://researchlibrary.finncap.com/File/View?file=4f444013-7e4f-416b-afc4-cb0711a86d05

Although clearly paid for by SRT, the note provides in depth coverage of the market for MDA systems (Marine Domain Management) and SRT's leading position in it. It also covers in some detail the £31m phase 1 of the Philippine Fisheries project but also several other near term opportunities that would have a material effect on the conservative forecasts currently made.

Regarding these opportunities, FinnCap say:
SRT "is working on a further six contracts, with a mixture of existing and new clients spread between S.E Asia and the Middle East, worth up to £212m moving into final contracting phase, with an additional £200m in the visible pipeline. These are imminent and winnable since most arise from long-standing relationships built up over many years."

These additional contracts would be significant in terms of profitability as the broker note points out
"a 40% gross margin on £212m of project work is £85m, against annual fixed costs of just £7.5m."

SRT shareholders may not be "there yet" but there's a growing sense that everything is moving rapidly forwards.

Disclosure, I hold SRT.

jonesj

15th Apr '19

Thank you for previous comments on SRT Marine Systems (LON:SRT). I have been looking into this company today & the information posted here is useful.

After years of negative cash flow, the main appeal to me seems to be the potential for growth and profitability.

However, I see jam has been promised tomorrow before . For example, this 2014 video is talking of a $200 million order pipeline within the next 2~3 years (8min 30 seconds onwards). That doesn't seem too different to the story in the more recent 2018 and 2019 investor presentations.
https://www.youtube.com/watch?v=Xah35MV_Fg8&t=328s

Effortless Cool

Yes, indeed, jam has been promised regularly. In fact, us longer term shareholders have been like donkeys persistently plodding after a jam smeared carrot dangling from a stick held out in front of us. We actually caught up with it once in March 2016, only to have it cruelly snatched away from us shortly after.

Things do seem to be falling into place finally now, however (or maybe I'm just gullible).

Rather unusually, you will find the ADFVN bulletin board very well informed on SRT Marine Systems (LON:SRT).

back2value

3rd May '19

Simon Tucker's webcast yesterday morning is worth a watch. He admits to being an eternal optimist - surely one of many essential qualities for leading a business that takes so long to develop complex government contracts - but there seems to be a real conviction that £200m+ of business is at the final stage of decisions being made at a top level, most of which is likely to be awarded to SRT within a 3-to-12 month timeline. If this turns out as planned then the current 32p per share should soon be a distant memory. I am effectively sitting on the fence, unwilling to sell for fear of missing out (I am currently underwater even though the company's prospects are far better now than when I bought at a higher price level) but not quite prepared to put down more cash, a decision which I suppose I hope I'll regret.

We'll see. I obviously hold, optimistically

B2V

4th May '19

Hi Effortless Cool,

Rather unusually, you will find the ADFVN bulletin board very well informed on SRT Marine Systems (LON:SRT).

I think you'll find that a number of the posters are longterm backers , including with discloseable shareholdings.

HTH and ATB

Are we there yet? SRT

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Alterego

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