I feel it’s truthful to say that SRT Marine Techniques (LSE: SRT) has confirmed to be a hidden gem for savvy traders who purchased a 12 months in the past. It’s doubled in that point and exploded 30% increased within the FTSE AIM All-Share Index at present (27 March).

Actually, since bottoming out as a 19p penny inventory in Might, it has jumped 200%! This offers the corporate a market cap of £149m, that means its nonetheless a relative stickleback inside the general UK inventory market.

Ought to I purchase this small-cap inventory? Let’s discover.

On the crest of a wave

SRT makes superior maritime surveillance and navigation transceivers. Its programs are utilized by coast guards, fisheries, and nationwide companies to enhance maritime safety, environmental safety, and regulatory compliance.

The share price has been boosted by a gentle movement of latest contract wins. In October, it secured a $213m contract with the Kuwait Ministry of Inside to offer a complicated maritime surveillance system over 12 years.

For context, SRT generated income of £8m in its 2022 monetary 12 months. So this was clearly a transformational deal for the agency.

Then in December, it signed a 10-year contract value $9m with an present Center East coast guard shopper, adopted by the graduation of the second part of a venture with an undisclosed nation’s coast guard, valued at $15m.

Why has the inventory simply surged 30%?

At this time, the agency simply launched its half-year report for the six months to the top of December, and it was extremely sturdy.

Income skyrocketed to £26.2m, up from £5.5m, and the gross revenue margin improved to 46%, up from 37%. And SRT swung from a £4.6m loss in the identical interval final 12 months to a pre-tax revenue of £2.8m.

In the meantime, its high-growth programs enterprise now has £320m of energetic initiatives, all of that are scheduled for implementation over the following two years. Some have ongoing knowledge and help contract intervals of 5 to 10 years, offering long-term recurring income.

Chair Kevin Finn commented: “The future of our systems business is increasingly bright, driven by a long-term global trend of sovereigns wanting to digitise and dramatically enhance their understanding, oversight and management of their marine domains.”

Huge pipeline

Again in September 2023, I wrote that SRT’s “complete addressable market seems very giant…The inventory is an fascinating play on the long-term digitisation of the worldwide maritime surveillance trade“.

I nonetheless suppose this. Nevertheless, I bought my SRT shares in 2024 to spend money on Windward (one other maritime tech agency). I didn’t wish to personal each. However Windward was lately snapped up at a sizeable premium to what I paid.

SRT’s replace was very encouraging, however multi-year initiatives in rising markets carry execution and supply dangers. Political shifts in shopper nations may impression funds, whereas the enterprise continues to be barely worthwhile. 

Additionally, based mostly on final 12 months’s income of £14.8m, the price-to-sales ratio is round 10. That’s expensive. Nevertheless, I’m studying hypothesis that full-year income may now attain greater than £80m. That might roughly be a 450% year-on 12 months enhance and make the valuation seem extra enticing.

Trying forward, the corporate sees a pipeline of alternatives from present and new clients value up to £1.2bn. This implies the inventory may nonetheless be a gem and I’m contemplating including it again into my portfolio.