Two Technology Stocks To Look at: ULE, CNS

  • Aug 16, 2019 BST
  • Team Kalkine
Two Technology Stocks To Look at: ULE, CNS

Two technology stocks that neutralise the enemy one in the real world and another in the virtual world, their comparative chart of stock prices is shown below.

Comparative stock price chart of ULE and CNS

(Source: Thomson Reuters)

Ultra Electronics Holdings PLC

Ultra Electronics Holdings PLC (ULE) offers solutions and products in the aerospace and defence, energy, transport, and security and cyber markets, by exercising software and electronic technologies. The operations of the group are differentiated in three operating divisions: Communications & Security, Aerospace & Infrastructure, and Maritime & Land. The company’s market-facing segments are Nuclear, C2ISR, Underwater Warfare, Aerospace, Communications, Land, Maritime, and Infrastructure.

Recent developments

The company’s joint venture with Sparton DeLeon (ERAPSCO) was awarded a contract with respect to the US Navy worth up to USD 1.04 billion. It is an IDIQ (Indefinite Delivery Indefinite Quantity) contract with validity of five years which reflects the inclination of the US Navy on anti-submarine warfare.

The company along with Sparton Corp will receive subcontracts with respect to production worth $75.75 million and $75.26 million respectively. The production shall commence at Sparton corp’s facility in Florida as well as the company’s facility in Indiana.

The company is optimistic about honouring this contract coupled with the expertise it possesses in this domain and it shall continue to empower the armed forces in the approaching years ahead.

Financial Highlights (H1 FY19, £ million)

In H1 FY19, the company’s reported revenue increased by 10.4 per cent to £387.1 million as compared with the corresponding period of the last year, while organic revenue surged by 8.3%, due to improved conditions in the United States market. Reported order book surged by 4.6 per cent to £1,014.1 million as compared to £969.2 million in H1 FY18, while on an organic basis, order book rose by 6.6 per cent. The order book  increased because of the improving defence budgets, notably in the United States, and some main wins on new and existing programmes. The operating profit (underlying) surged by 10.4% to £52.9 million against the same period in 2018. Organically, the underlying operating profit surged by 7.7%, while operating margin (underlying) was 13.7%. Statutory operating profit rose by 34.9 per cent to £41 million as compared with the corresponding period of the last year. The reported underlying profit before tax improved by 6.7 per cent to £46.5 million against the £43.6 per cent in H1 FY18. On a Statutory basis, profit before tax stood at £37.9 million, an increase of 89.5% from the corresponding previous year period. Underlying EPS surged by 16.4% to 52.5 pence against the 45.1 pence against the H1 FY18, while statutory EPS surged by 116.5 per cent to 43.3 pence. The interim dividend per share was 15 pence, an increase of 2.7 per cent as compared with the corresponding period of the last year. Net Debt to EBITDA decreased to 1.32x against the 1.39x in H1 FY18.

The company had started a good year because of the decent order book development, benefitting from strong markets, and continued organic revenue growth. The major markets are continuing to grow and the strong technology base positions and also meet the customer’s needs.

Supply chain risk and Brexit headwind might impact the business operations. In the remainder of 2019, the company faces several uncertainties and potential risks that may have a material effect on its performance. The defence budget remains under pressure in the United Kingdom market.

The company had shown a decent trend in the top-line and bottom-line performance in the current period. Moreover, the company is trading near its 52-week high, raising doubts at its further upside potential at current prices.

ULE Share price performance

While writing (as on 16 August 2019, at 01:17 PM GMT), ULE shares were trading at GBX 2,172 per share; surged by 1.4 per cent as compared to the previous day closing price level. The company’s M-cap (market capitalisation) stood at GBP 1.51 billion with a dividend yield of 2.43 per cent.

In the last year, ULE shares have registered a high of GBX 2,232.00 (as on 13 August 2019) and a low of GBX 1,200.00 (as on 28 February 2019). At the current trading level, as quoted in the price chart, its shares were trading at 2.68 per cent below than the 52-week high price level and 81 per cent above the 52-week low price level.

While writing, the stock’s volume before the market close, stood at 28,868. Stock's average traded volume for 5 days was 204,310.20; 30 days- 206,052.70 and 90 days – 149,700.22. The company’s stock beta was 0.63 which means it is less volatile as against the benchmark index.

The shares of the company (at the time of writing) were trading above the 60-days and 200-days SMA, which shows a positive trend in the stock price movement and could further move up from the current trading levels.

In the past 1 year, ULE shares have delivered a positive return of 35.83 per cent. Also, on a YTD (Year-to-Date) time interval, the stock surged by approximately 64.77 per cent and was up by 32.47 per cent in the last three months.

Share's RSI (Relative Strength Index) for the 30-days, 14-days and 9-days was recorded at 72.62, 74.27 and 73.28 respectively. Also, the stock’s 3-days RSI was recorded at 59.13.

Corero Network Security PLC 

Corero Network Security plc (CNS) provided security solutions for Distributed Denial of Service (DDoS) attacks on networks of ISP’s (Internet Service Providers), web hosting services, and online entities. The security solution is capable of automatic detection and neutralising DDoS attacks by its in-house network security appliance which can be configured to deter these attacks. This appliance is known as TDS (SmartWall Threat Defense System) technology. This technology can help in securing network from attacks and provide around the clock monitoring. It acts as frontline of defence against these attacks. The company has its footprint in the United Kingdom and the North American region. The company has core competency over peers due to consistent R&D investment and inclination towards new technologies with machine learning and artificial intelligence capabilities. The company strives to develop new algorithms to neutralise new DDoS attacks.

Trading update for 26 weeks period ended 30th June 2019  

On 16th August 2019, the company announced trading update for half year 2019. The company’s revenue was recorded at $4.2 million for H1 FY19 as against $5.0 million in H1 FY18. The company’s operating costs were recorded at $5.3 million in H1 FY19 which were same as H1 FY18. The company’s cash balances stood at $6.9 million on 30th June 2019. The company’s debt was recorded at $3.2 million on 30th June 2019. The company saw steady results in H1 FY19 with good levels of consumer engagement followed by renewal of contracts. Corero’s management expects the revenue to surge by 20 per cent in FY19 in comparison to FY18 ($10 million). The company shall opt for fundraising if additional working capital is required.

Financial highlights for FY18 period ended 31st December 2018

The company’s revenue was recorded at $10.0 million in FY18 as against $8.5 million in FY17. The company’s operating expenses incurred this year stood at $12.7 million as against $14.9 million in FY17. The loss before taxation of the company was recorded at $5.2 million in FY18 as against loss of $8.5 million in FY17. The company’s loss per share (reported) plunged to 1.4 cent per share in FY18 as against loss of 3 cent per share in FY17. The company’s net cash stood at $4.4 million (31st December 2018) as against $1.4 million (31st December 2017).

CNS Share price performance

While writing (as on 16 August 2019, at 01:29 PM GMT), CNS shares were trading at GBX 3.55 per share; plunged by 43.65 per cent as compared to the previous day closing price level. The company’s M-cap (market capitalisation) stood at GBP 25.27 million.

In the last year, CNS shares have registered a high of GBX 13.60 (as on 16 November 2018) and touched the fresh 52 week low on 16 August 2019. At the current trading level, as quoted in the price chart, its shares were trading at 73.89 per cent below than the 52-week high price level and 43.2 per cent below the 52-week low price level.

While writing, the stock’s volume before the market close, stood at 6,392,276. Stock's average traded volume for 5 days was 140,862.40; 30 days- 68,901.57 and 90 days – 66,974.13. The company’s stock beta was negatively corelated against the benchmark index.

The shares of the company (at the time of writing) were trading below the 60-days and 200-days SMA, which shows a negative trend in the stock price movement and could further move down from the current trading levels.

In the past 1 year, CNS shares have delivered a negative return of 24.78 per cent. Also, on a YTD (Year-to-Date) time interval, the stock plunged by approximately 49.60 per cent and was down by 25.88 per cent in the last three months.

Share's RSI (Relative Strength Index) for the 30-days, 14-days and 9-days was recorded at 17.38, 3.01 and 0.44 respectively.

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