Shares in issue: 297.67m
Current Mcap: £3.8m
Major shareholders Total: 32.74%
Transense Technologies (LON:TRT) has over the last 15 years lost over 99% of its value, once trading at the dizzy heights of a quid or more the story has failed to excite buyers however.
The company specializes in a broad range of products and markets. Its main source of income has for the large part come from the sale of its commercial Tyre monitoring systems. Mining enterprises make up a large portion of TRT’s custom base, however in more recent times the struggle of cutbacks of a declining mining market and losing sales revenues has weighed heavily. The company have gone from turning over many millions in any 6 month period to turning over just shy of £1m in H2 2014. Yet the outlook seems to be changing at a pretty alarming rate, with a mcap of £3.8m & £1.5m of that in cash it’s surprising the market appears to be dismissing a primary turnaround ingredient.
The management have been very proactive in ways to capitalize on the existing market while making its product and services more financially appealing to a major. Cutbacks in the mining industry have in recent times been brutal thus management decided it better for the company to offer their iTrack product on an operating fee basis (A fee paid per truck fitted on a monthly recurring usage).
Since its decision to offer the iTrack on a rental basis the company has signed 3 contracts, these are with the mining majors Glencore, BHP Billiton and also for the first time in the UK passenger car market. The most promising aspect in these contracts, as well as adding considerable value to the company, is cash flow for the coming year from the uptake of the tech will very likely open the door to a lot more business within these markets.
Commenting on the most recent of the contracts Graham Storey CEO of Transense said:
“We are delighted to be adding BHP Billiton to our growing list of major mining clients for iTrack. The new rental model is now beginning to generate a meaningful and growing ongoing revenue stream.”
Transense is also by no means a one trick pony as well as research and development areas within the company it also holds patented iSAW technology which provides continuous, real-time monitoring of temperature, humidity and partial discharge, the 3 leading indicators of potential failure of electrical power critical assets. Due to current cost cutting measures the company has made the decision to sell this branch of the Transense company which will not only provide near term working capital for the company, aiding them to progress the profitable areas within the company, but also help reduce the current monthly cash burn by around £100k.
Transense’s main areas of research and development have been working with some of the best in each field, from Mclaren, General motors and also a European Wind farm project which is outlined below.
“In a further application of Transense’s torque sensing solutions, the Company is now part of a consortium of nine companies, “IntelWind,” that has begun development on a major EU funded project to improve the efficiency of wind turbines. The expertise gained during the technical development work on these much larger shafts has applications in many other markets, such as marine and power generation. The IntelWind consortium projects turnover accruing to Transense of €700k for the year commencing Q4 2013 rising to €2.1 million in 2017.”
With the balance sheet looking less than desirable over the last few years I personally believe the steps management have been taking in moving the company forward towards a profit generating business are paying off however it’s early days in the turnaround. Four contracts have been signed in the last 6 months which shows confidence, the company’s current cash position is £1.5m, against a market cap of £3.8m, looks attractive. TRT are working with some of the biggest mining majors in the world and so far only gaining a very small % of the market share, proving they are the favorite of all the competition, bullish forward looking statements from the management & actively looking to sell one of its divisions, the future looks positive and a lot less turbulent.
From a charting perspective, positive divergence on both the RSI and MACD with positive news flow increasing, easily achievable target in the near term around the 200 day moving average at 3.8p, with a longer term view of cracking new 12 month highs.
Current SP 1.3p – Speculative Recovery Play – Buy