Sheffield-based Pressure Technologies Plc (PRES.L) was founded on its leading market position as a designer and manufacturer of high-pressure components and systems serving the global energy, defence and industrial gases markets. Today it continues to serve those markets from a broader engineering base with specialist precision engineering businesses and has a worldwide presence in Alternative Energy as a global leader in biogas upgrading. PRES has four divisions, Precision Machined Components, Engineered Products, Cylinders and Alternative Energy, serving four main markets: oil and gas, defence, industrial gases and alternative energy.
On Dec 12th, 2017, PRES published results for the year ended 30 Sept 2017. Revenues rose to £38.4m (2016 £35.8m), with adjusted operating profit of £1.1m (2016: loss £ (0.4) m) and adjusted EPS of 6.3p (2016: loss (2.6) p). CEO John Hayward said the reorganisation in recent years “means that there are significant operational gearing gains to be made as volumes increase.” Referring to the post year end £4.8m institutional fundraising, he added that the share issue would “improve the Group’s ability to support large-scale organic growth,” … and with no immediate major capital expenditure required “the Group is in good shape and well prepared to capitalise on opportunities as they arise.”
In mid March 2018, the VectorVest RT (Relative Timing) metric for PRES started climbing, flagging up a potential growth opportunity. RT is a fast, smart, accurate indicator of a stock’s price trend, and despite the stock currently trading close to year highs at 182p, PRES still logs a current rating of 1.55 on this metric, which is excellent on a scale of 0.00 – 2.00. The stock also scores a high RV (Relative Value) rating of 1.47 – also excellent on a scale of 0.00 to 2.00. This indicator is far superior to a simple comparison of Price and Value because it is computed from an analysis of projected price appreciation three years out, AAA Corporate Bond Rates, and risk. A fair RS (Relative Safety) rating of 0.88 (scale of 0.00 to 2.00) may deter cautious traders, but at the current 182p the value opportunity is clear to see against a current VectorVest valuation of 228p per share.
The chart of PRES.L is shown above. The share is on a BUY recommendation on VectorVest after recently charting a first rising bottom. Since January 2018 the share has charted a “cup and handle” pattern which combined with the rising bottom and the current break of the 52-week high paints a positive technical picture. The technical target from the cup and handle is the same as the VectorVest valuation. Adventurous traders should consider an entry at 180p with a stop at 160p and target of 220p.
When examining the factors that go to make up successful VectorVest stock picks, the companies in question frequently provide specialist services to a niche market and are manoeuvring to dominate through rapid growth. PRES is one such company, and so successful has it been that institutional investors approached the board and funded a £4.8m war chest for future acquisitions. The low RS rating may prove a bridge too far for less adventurous investors, but VectorVest believes all the factors are in place to drive rapid growth in the coming year.
Those who have experience in sizing positions and managing risk carefully should consider the opportunity.
May 15th, 2018