We believe AB Dynamics (ABDP:AIM) is at a major turning point in its life and could see significant share price gains for several reasons.

It is slap bang in the middle of the electric vehicle revolution. The company has a growing portfolio of unique testing products critical to developing and launching increasingly sophisticated vehicles.

Its order book is at an all-time high and we believe its services will be in very strong demand over the coming years. As such, it justifies a premium valuation.

The automotive industry is undergoing a radical change with both traditional players and tech firms developing electric vehicles. They all need to be tested for safety and efficiency, either in a live environment or using a simulator.

AB Dynamics not only has the necessary solutions but it also has relationships with the top 25 automotive companies in the world who are already using its products and services.

Car makers want to do repeat tests to check everything works and AB Dynamics’ robots can do anything a test driver can do and repeat it with great accuracy. It generates a huge amount of data which can then be analysed to help produce the optimal driving machine.

‘If you look at the top 20 companies in the world in terms of research and development spend; six of those are car companies,’ said outgoing chief executive Tim Rogers at a recent investor event.

The company is forecast by stockbroker Panmure Gordon to secure its first order for a new vehicle driving simulator developed in partnership with Williams F1 in the current financial year.

‘More work is now done on a computer but there comes to a point where you need a prototype,’ said Rogers. ‘Wouldn’t it be nice if the driver could get in at an earlier stage and drive a model?’ That’s where its simulator comes in.

AB Dynamics raised £5.4m in 2016 to recapitalise the company, finish a new manufacturing facility and support its R&D functions. It has grown its software capabilities and created new roles internally.

It is now close to appointing a new chief executive to drive corporate development. Rogers recently said at an investor conference that the candidates are ‘extremely high calibre’ and that he wouldn’t have got the job had he applied. ‘The company needs someone familiar with larger revenue and the M&A process,’ he commented.

The group is forecast to grow pre-tax profit from £5.9m in 2017 to £8.9m in 2018. It ended the 2017 financial year with close to a £10m net cash position. (DC)

‹ Previous2017-12-21Next ›