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TRT Transense Technologies – *Update

Since my last write up on TRT at the end of April the shares have gained over 200% over the following 2-3 weeks… Of course naturally I am delighted and with a previous target of 3.6-3.8 and having on Friday traded at 3.4 the call seems to have been vindicated.

I see on Friday Zac Mir was calling 6p on the stock and whilst I agree with him that longer term it may well get there but I will say from these levels more caution is needed then the 1p region it was when I wrote the first article.

Management have over the last 6 months put steps in place to turn its position around there really is no doubt about that however it has a long way to go before it becomes cash positive.

As at the end of 2014 the company had around £1.5m in cash resources and a loss on the previous 6 months of £1.7m… now assuming the cash burn over the next 6 months remains the same that means the company will run out sometime within the next 3-7 weeks.

TRT is trying to sell it’s Intellisaw division of the business.. of course this will both bring in net cash to stabilize the future of the company but also reduce the company’s cash burn by a substantial amount… TRT have stated in the half year results that it had received a positive response from prospective buyers and previously management have stated intellisaw is worth over £6m which would put the company into a very healthy position to utilise the new strategy moving forward and is around 2 years of current cash burn.

The company has secured more contracts with the new strategy and previously stated that it has more tenders out which it may receive in the near term… From an investor’s point of view this is of course a positive as is the news flow that comes with it, some big named contracts and MOU’s in the mix.. Having said this however the company has failed to release any figures which really can lead us to believe that they are not going to impact the balance sheet enough to either turn the company into a profit making entity nor support the company & growth moving forward.

So assuming they are burning cash at the same rate as the previous 6 months they will run out some time in June which for me means a couple of months of uncertainty as the cash flow will be reducing by the day and if a sale is not secured then a fund raising of some sort is almost inevitable.

Based on the above I have already taken profits but will be monitoring the situation going forward sat on the sidelines.. it is no doubt moving in the right direction but until funding is secured either through the sale of Intellesaw or on the market I remain cautious.

(Note: The author filed this piece during the extended weekend)

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