05/05/2006
Hong Kong-based RC, steered by chairman and chief executive Dr Raymond Chu, was our Company Profile last June. We picked the shares, priced then at 33.5p, for long-term growth and investors that followed us in are now sitting on gains of 80% plus, with the price having raced to 61.5p.
News flow from the firm, which specialises in the development, manufacture and distribution of biometric and radio frequency identification technologies, has been exceedingly upbeat. Dramatic rises in sales and profits have been announced for 2005, first orders were won in the Middle East and intriguing collaborations announced with both Sony and Intel - the latter to jointly develop RFID solutions for the Chinese healthcare sector.
Most recently, the company took a 60% stake in two South-East Asian IT equipment firms (with options to take the remaining 40%) for a maximum £4.7m in cash and shares. Chu argues the move is ‘another major step for the group and will allow us to own both facilities for the manufacture of hardware products and retail outlets to sell our biometrics products directly to consumers.’
Broker Corporate Synergy has raised a bumper £25m for the fast growing company through a new share placing, pitched at 53.5p, to boost working capital and fortify the balance sheet. The funding should help RC tap into burgeoning target markets on a tear over the past eighteen months or so, growth that helped RC post 360% sales growth to over £15m last year, with profits powering up by 114% to almost £5m.
Despite its growth rates, profits and cash generation, RC trades on a forward multiple of only 11.4 – based on forecast 2006 profits of £7.7m and earnings of 5.4p from £24m sales – which looks miserly indeed. The shares seem to have been held back by the presence of a dominant, but now diluted shareholder, as well as a perceived lack of corporate visibility with the company based miles away from prying City eyes.
But if you can live with that, the growth rates, improving liquidity and recent collaborations and acquisitions make the shares a good buy.
| Market cap: | £86.26m |
| PE Forecast: | 11.4 |
| Share price: | 61.5p |
| AIM | £84.54m |
36.50p
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-0.75p
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| Other company articles: |
| 02/09/2008 |
| 30/06/2008 |
| 30/08/2007 |
| 03/08/2007 |
| 15/05/2006 |
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