Chippenham-based SciSys Plc (SSY.L) supplies software systems, IT-based solutions, and support services to the space, media & broadcast, government, defence and commercial sectors in the UK and abroad. The company designs, builds, supports, and develops ICT services, e-business, and advanced technology solutions for blue chip and public sector organizations. SciSys also provides services to various areas, including transport, utilities, and communications. The company was founded in 1980 as Science Systems plc, changed its name to CODASciSys plc in 2002 and then changed its name to SciSys plc in 2006.
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On Sept 21st 2017 SSY reported a strong set of interim results for the half year to 30 June 2017. Adjusted operating profit rose 18% to £1.3m on revenues up 23% at £27.2m. Net debt was reduced to £9m (from £10.2m at 31 Dec 2016), and with a record half-year order book of £64m (2016: £35m), the interim dividend was raised by 11% to 0.59p per share. Dec 2016 acquisition, ANNOVA, also achieved major project milestone on flagship BBC contract. Chairman Mike Love said; “We are very pleased and buoyed by a solid operational performance and key contract wins across the Group resulting in our record order book. We are particularly pleased by the robust performance of ANNOVA; it is already evident that this acquired business is delivering significant strategic benefit to the Group. At this point in time we anticipate that we will deliver full-year results at the upper end of current guidance.”
The opportunity at SSY had been flagged by VectorVest in the summer of 2017, when the stock logged a rise in GRT (Earnings Growth Rate). At this time SSY shares were trading around 100p, and occasionally dipping below. Despite the RS (Relative Safety) ‘fair ‘rating scoring 0.96 on a scale of 0.00 to 2.00, SSY logs a forecasted GRT of 19%, which VectorVest considers to be very good. Added to this, the VST-Vector (VST) master indicator, (ranks every stock in the VectorVest database), also logs a ‘very good’ rating of 1.28 on a scale of 0.00 to 2.00. Finally a valuation of 162p indicates potential upside from the current 127p.
The chart of SSY.L is shown above in my normal format. The share has broken the horizontal resistance which was in place since November 2016. Using a concept known in technical analysis as a “measured move” the technical target for the move upwards is approximately 160 which is similar to the VectorVest valuation at present.
Summary: Looking further into the past, the charting picture for SSY sees a steady upward trajectory since spring 2015. But now, strong half-year revenue and profits growth, the ANNOVA acquisition and the ongoing reduction in debt have transformed SSY into an attractive growth company. With forecasts for a good set of FY numbers and a trading update imminent, key VectorVest metrics are indicating that the time is right to consider buying into this growth company.
Dr David Paul
November 15 2017
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