17 Feb | Getech – Buying Opportunity?
Getech – the geoscience services business specialising in the provision of data, studies and services to the oil, gas and mining exploration sectors – delivered a trading update today for the six month period ended 31 January 2014.
Whilst trying to remain upbeat for their full-year prospects, there was no escaping the elephant in the text:
The Company has seen strong demand for its consultancy work in the first half of the current financial year. However, irregular purchasing patterns across the customer base, driven by cyclical budgetary constraints, have resulted in reduced levels of overall revenue in comparison to the previous period. The Company expects revenue for the first half to be £3.0m (2013: £3.9m) giving a profit before tax substantially lower compared with the corresponding period last year (2013: £1.4m).
As a result, early trading in Getech saw the price down over 32 pence (30%) at stages in the hours following the release.
An over-reaction? Possibly. The RNS went on to add:
The Company remains focussed on delivering results in line with full year expectations. A substantial part of second half income has already been committed, and a return to a more regular purchasing pattern by customers is expected in the second half given the continued significant interest in Getech’s products and services. On this basis, and subject to the conversion of a number of leads already in the sales pipeline, the Directors believe that the Company will still trade in line with expectations for the full year. The Company will keep shareholders updated as the year progresses.
If Getech can manage to meet year end expectations and news in the interim is upbeat, I’d be suprised if the price doesn’t make up today’s losses quite quickly and continue it’s merry trajectory northward in the coming months.
We first bought into Getech at 44.99 pence back in October 2012. Here are the reasons why.
Fundamentally not a lot has changed and today’s drop does present an excellent buying opportunity for the brave.
If in fact full year targets are met – as hypothesised in the RNS – then this morning’s 30% drop has opened the door to investors to get into a quality company at prices I certainly didn’t expect to see again.
But – and there’s always a but – if today’s trading update is followed in the coming weeks and months with further downbeat news, Getech could give up all the gains it has made in the past 12 months.
I’m willing to give Getech the benefit of the doubt on this occasion. Since we’ve held them they’ve more than doubled in price and hardly put a foot wrong. We’ve added to our holdings this morning.
There’s plenty to like fundamentally as can be seen from our Stockopedia screen below. Especially when the price change and volume elements – elements 1 through 5 – are discounted.
I’ll leave the final words to Stuart Paton, Non-Executive Chairman of Getech Group:
“Whilst we have witnessed lower than expected revenue in the first half, we believe this is an industry wide issue and anticipate a return to normal demand cycles in the second half. The positive feedback we have received from clients has confirmed there is no reason to question the value proposition of our products and we remain optimistic that we will see further significant contracts coming through in the second half.”
For more information on Getech, visit their website.
Thanks again for dropping by.