AIM listed Pennant International Group PLC creates and exports training solutions aimed at the next generation of Engineers in the defense and regulated civilian sectors. Pennant International’s products and services include electrical and mechanical trainers, E-learning, Virtual Reality, Emulation, interactive Technical Documentation and Media Services and many more related skills and products. The company was established over 60 years ago and has grown through a combination of product expansion, customer development and acquisitions. The Group operates worldwide, with offices in Europe, North America and Australasia.

Earlier this month Pennant International announced transformational news that it has been provisionally selected on two major contracts with the combined value in the region of £35 to £40 million, we covered this news in a previous article which is available here. These two contracts if signed have the potential to drive Pennant’s order book as high as £70 million from the current £30 million level it’s at today. In addition to these two prospective contracts Pennant International today has announced more good news in that it has been awarded a long-term contract by an undisclosed new government client in the Asia-Pacific region for the supply of virtual training software to help air force maintenance engineers practice procedures, functionality and diagnostics in a virtual environment. Pennant will be supplying its Virtual Aircraft Training System (“VATS”) (with customer-specific modifications). In addition to this new customer Pennant has also received a contract extension in it’s software services division to continue the provision of consultancy and technical documentation services until June 2021 for an existing customer in the maritime sector.

Whilst there are no exact financial values specified for either the new order or the contract extension, both contracts help expand the order book further and Pennant International appears to be going from strength to strength. Analysts are forecasting £3.5m of adjusted profit before tax and earnings per share of 9.8p for 2018 and with circa 100% of forecasts now covered from a revenue perspective the risk certainly seems to be to the upside. With the shares currently trading at 118p were looking at a p/e ratio of 12 for 2018, this seems like a very attractive valuation considering the fact that current forecasts don’t account for any of the two previously discussed £40 million contracts which if confirmed will transform the group and propel revenue and profits higher over the next few years. Even if Pennant fails to get the two large contracts over the line with the shares trading at an undemanding p/e ratio of 12 the downside risk should be limited. With Pennant’s pipeline / opportunity pool stretching comfortably to £100+ million it is highly likely that further contract wins will be obtained in the near future, the shares are certainly one to consider.

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