Pennant International Group plc the AIM quoted supplier of integrated training and support solutions announced this morning that it has been provisionally selected on a major programme with an expected contract value in the region of £25 to £30 million.

Pennant international was established over 60 years ago and operates worldwide with offices in North America, Europe and Australasia. The group essentially develops training systems aimed at the defence and regulated civilian sectors. With all the geopolitical tensions we see building and Trump pushing NATO to increase defence spending the defence sector appears set to experience some tailwinds over the coming years. With Penanant’s pipeline / opportunity pool stretching comfortably to £100+ million, more contract awards such as this one could certainly be on the cards.

Whilst nothing is set in stone on today’s announcement until contracts are signed, with the market cap of Pennant sitting a sliver above £35 million this is certainly significant news for the company. The award if confirmed will be transformational for Pennant International effectively doubling their order book which currently sits at £30 million, in addition to today’s announcement the company is currently awaiting confirmation on a £10 million contract with a customer from the middle east. If both contracts are signed Pennant’s order book would swell to a record £70 million and would provide earnings visibility all the way to 2020. If both orders are confirmed and the revenue is split evenly throughout the contract period Pennant could be looking at revenue of £35 million for 2019 a 51% increase over 2017 levels, better still there could be yet even more contract awards offering even further upside.

Even without these two contracts analysts are forecasting Pennant to hit £20.5 million of revenue and adjusted EPS of 9.8p for 2018, leaving the shares trading on an a very undemanding forward P/E ratio of 11. With revenue growth of 11% forecast for 2018 without the new contracts and the potential upside they offer the shares are certainly worth considering.

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