Intelek - 18p

Intelek, the AIM listed company, is a designer and manufacturer of electronic systems for satellite and microwave communications and is a specialist manufacturer for the aerospace market. The share price languishes over 23.5 per cent below last year's high and stands on a modest prospective p/e ratio of just 6.5x, thus providing scope for a re-rating.

An increase in gross margins of two per cent to 30.9 per cent helped underlying pre-tax profit increase by 41 per cent to £3.3 million (2007: £2.3 million), and this follows a 30 per cent rise in the previous financial year.

Underlying earnings per share increased by 36 per cent to 2.78p (2007: 2.05p) and the final dividend was increased by 15.4 per cent to 0.30p (2007: 0.26p) per share, increasing the total dividend for the whole year by the same amount to 0.45p (2007: 0.39p). Net debt at the group was reduced by 25 per cent to £3.9 million and the pension scheme deficit was also reduced by £0.1 million to £5.2million.

Intelek operates through three separate divisions. Satellite Communications Equipment is the largest part of the group and comprises Paradise Datacom, which operates from facilities in Witham, Essex and Pennsylvania, USA. The company produces a range of amplifier and modem products for use in the terrestrial segment of the satellite communications industry, such as those used in news trucks, on the back of satellite dishes and so on.

The single largest application for satellite modems is to link GSM/cellular networks together via satellite in geographic areas not well served by terrestrial services, such as remote oil/gas fields.

During the year the company continued to implement several key initiatives to increase its market share. Sales personnel were recruited in the US and plans to establish permanent facilities in Asia were advanced, with a Bangkok office opening in April 2008. Labtech Microwave has been restructured and is now a leading European-based designer and manufacturer of specialist microwave package products and solutions for the security, defence and communications markets worldwide.

Its products are used in radar, warships and aircraft. CML Group supplies a range of components and parts to the aerospace industry in both metals and composite materials such as carbon fibre and Kevlar.

The group made excellent progress in its last financial year with all its businesses performing well and, despite the challenging market conditions, further progress is expected in the current financial year. Despite the prospects the shares languish on a very low p/e ratio and this provides scope for a re-rating of the shares.

  • WARNING: Opinions expressed are the writers' judgments at the time of writing. The information does not constitute a personal recommendation and readers should seek their own professional advice as to the suitability of the investments.