SRT in the News

23rd July 2010 - Investors Chronicle

SRT’s ship set to come in

Increased emphasis on homeland security coupled with more water-borne crime has focused attention on how countries can best control who and what is allowed to enter their territorial waters, and this is creating a lucrative opportunity for Software Radio Technology (SRT).
SRT originally attempted to crack the so-called Tetra radio market, supplying high specification secure radio systems to emergency services. But being a small fish in a big pond proved too difficult so the company is now concentrating on its Automatic Identification Systems (AIS) products for the marine industry.
AIS products allow maritime authorities to identify the position and identity of any vessel carrying a transponder. It was specified by the International Maritime Organisation in 2002 as the system of choice for vessel identification. The cost of a Class A unit was initially prohibitive and even Class B units, which are simple transmitters, cost several thousand dollars, preventing mass take-up.
But SRT has driven down the cost of its AIS products and, as the market begins to achieve scale with up to 500,000 vessels across the globe now under mandate to adopt AIS in the next few years, the price per unit is likely to come down further. Legislation is now in place for AIS to be fitted on inland waterways in the European Union for up to 25,000 vessels in Turkey and up to 300,000 vessels in India following the water-borne Mumbai terrorist attacks. The host of other mandates are in the pipeline, including China, South Korea, Japan and the US. In total, there are 26m boats and ships worldwide that could be fitted with AIS technology.
SRT’s products, according to management, lead the market on both price and performance and are beginning to gain traction. SRT’s order book was $4m (£2.6m) in April and by the end of June had risen to $5.7m. Further advances means SRT will deliver smaller and cheaper AIS products by next year. Its strong market position could even see the company become a takeover target.
With rapid and sustained growth in this market expected over the coming years, SRT has to remain vigilant that its customers, who typically package up the SRT component inside their own products, maintain the quality and pace of development and are able to shoulder the financial burden of any rapid increase in demand. Indeed, SRT has renegotiated contracts with suppliers recently to reduce its own financial obligations, hopefully lifting the pressure on its working capital. True, its reliance on customers and the pace of government regulatory roll-outs adds risk. A further issue for investors is the absence of profit forecasts from City analysts. Neither SRT’s bosses, nor the company’s stockbroker, Westhouse Securities, are currently willing to commit to forecasts.
Nonetheless a forward order book of $5.7m bodes well for a significant improvement on last years performance and, with the market beginning to gather pace and further mandated demand to come, SRT is well placed to further improve on a stunning 12 months in which its share price has risen 10-fold. Buy.