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BATM Advanced Communications Ltd: THE INVESTMENT CASE

BATM Advanced Communications seeing the rewards from investment and new product launches

It also confirmed it expects growth for the full-year to be in line with market expectations
BATM Advanced Communications seeing the rewards from investment and new product launches
BATM has a thriving cyber security operation

BATM Advanced Communications Limited (LON:BVC), a provider of real-time technology for networking and lab systems, is reaping the rewards of sustained investment and product launches.

A strong second half performance in 2017 prompted the company in February 2018 to advise the market to raise its expectations in terms of revenue and underlying earnings (EBITDA).

The group said it expects revenue for 2017 to be around US$106mln, which would represent year-on-year growth of 17%.

The increase in revenue was driven by growth in both of the group's divisions, BATM said.

EBITDA is expected to be around US$7.0mln, up from US$2.8mln in 2017, although the group pointed out that both the 2016 and 2017 EBITDA figures were inflated by profits from property disposals.

In 2017, the EBITDA figure was boosted by roughly US$5.6mln of profits from a property disposal, compared to the preceding year when it pocketed a profit of around US$2.8mln from another property disposal.

The business is divided into two parts, both of which are growing

The group operates two divisions: bio-medical (which includes diagnostics and accounts for around 58% of total revenues) and the networking and cyber division, which accounts for 42%.

The bio-medical arm is split into three further sub-units: distribution operation, eco-med (waste treatment) and sterilisation and diagnostics. The networking and cyber division is just that and does what it says on the tin.

In 2017, the networking & cyber division generated significantly better-than-expected sales largely due to growth in the group's existing information and communications technology services and solutions business as well as its success in implementing its strategy to leverage the telecom industry transition from hardware to network function virtualisation (NFV) and software-defined networking (SDN).

Revenue growth in the Bio-Medical division was driven by stronger sales in the distribution unit, mostly based on diagnostic and molecular biology products and services.

Strong finish to 2017 bodes well for current trading

“The importance of this update, in our view, is what it implies for the trading performance going into the current year, in particular higher revenues from recent published contract success across the group with positive operating leverage beginning to come through,” said Shore Capital, the company’s house broker.

The broker has upgraded its expectations for 2018 accordingly, noting that “investors will welcome this significant trading improvement after the last few years of strategic development from BATM”.

It has bumped up its revenue forecast by 9% to US$110mln while its underlying earnings (EBTIDA) estimate has been increased from US$2.8mln to US$3.9mln – an increase of 39%.

Adjusted earnings per share are now forecast to be 0.25 cents versus 0.07 cents previously.

“With BATM’s intellectual property set configured to tackle real world challenges in its specialist markets, we believe that the scope for further revenue and profit improvement is significant,” the broker said.

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February 19 2018
It also confirmed it expects growth for the full-year to be in line with market expectations

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