Thalassa Holdings - broker upgrades
House broker to Thalassa Holdings has issued an update lifting their current year earnings estimates to 12.1c (c8p) and target price to 86p. The revised estimates follow THAL’s recent trading update which confirmed contracted revenue of US$15m for the current financial year.
Revised earnings estimates prudently allow for an increase in the cost of sales as a percentage of revenue to 63% (from 50%) due to the likelihood of lower margin contracts using new technology. They also assume an increase in administration expenses and tax rate. Revised estimates look easily achievable to us, although the execution risk for a small business remains. Despite the recent boost to the share price, the shares still only trade broadly on a par with the net asset value at 31st December 2011 of US$9m (£5.76m) which included nearly US$2m of cash. Remains an interesting one to…