Investor's Champion Blog
Provides refreshingly forthright, independent comment on predominantly small cap companies and specialist investment funds. Informed opinion, based on first-hand research, but pulls no punches in exposing management weaknesses.

Zytronic-a great little company that could really fly.

I met the management of Zytronic yesterday, a business based in Blaydon-on-Tyne which is involved in the development and manufacture of optical filters and glass composites to enhance electronic displays.

Applications for its products include touchscreens for ATMs, vending machines, ticketing machines, passenger information systems, petrol dispensing equipment; in fact the potential applications appear to be endless. Next time you purchase a rail ticket from a machine you might be touching a Zytronic screen.

In support of the market growth it is noticeable that many simple controls are also starting to use sensor technology, an area in which Zytronic appears to be a world leader.

In the current AIM climate of consolidation, roll-up vehicles (key buzz words), resource hopefuls (more often hopeless) and an increasing number of ‘green’ floats, it really was a joy to sit down with a normal business that is seeking to grow organically in a measured and responsible manner.

Not that exciting you say! Well Zytronic seemingly has a potential blockbuster in its new ZYPOS product which is well placed to replace incumbent technologies through offering superior performance at a competitive price.

Recent results were excellent with Turnover up 16.2% (all organic and that’s nothing to do with food!), gross profit maintained at c31% and EPS up 70%. Although it is in the middle of a key expansion phase the business is highly cash generative with operating cash just over 100% of operating profit.

Zytronic appears to have everything; great products, patented technology huge market potential, manufacturing capacity, excellent cash generation etc.

Priced at 27x 2007 estimated earnings the shares might look fully valued to many but this little business really looks like it could start to fly.

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