The Zicom Group Limited (ASX: ZGL) share price has had an exceptional trading run today, closing 128% higher at 13 cents.
The Zicom share price blasted off the blocks this morning – even reaching a new 52-week high of 22 cents – off the back of a multi-million dollar deal announced yesterday.
Zicom Group is an integrated manufacturer of marine deck machinery, fluid regulating and metering stations, transit concrete mixers, foundation and geotechnical equipment and precision engineered and automation equipment. The company also provides production integration solutions and hydraulic system services.
Why is the Zicom share price rocketing?
Yesterday, Zicom announced a $60 million deal to design and supply LNG propulsion systems for several oil product tankers being built for a leading European oil tanker owner. The orders have been scheduled for delivery in 2022/2023.
The company cited this deal as a testament of its momentum to transform Zicom’s marine sector. Zicom advised that it has been developing technology for green energy propulsion systems for ocean-going vessels over the past 3 years.
The company believes that this strategy now enables Zicom to expand into the entire shipping industry rather than only focussing on offshore marine applications.
Zicom also noted that demand in the offshore marine sector appears to be showing some positive signs.
New shipping regulations position Zicom for growth
The International Maritime Organisation (IMO), which is part of the United Nations, regulates international shipping.
According to Zicom’s announcement, the IMO 2020 rules mandate ocean-going vessels to reduce sulphur emission from engines to 3.5%, down from 4.5%.
Meeting this mandate will require that vessels install scrubber filtration systems or use a low sulphur fuel in place of diesel.
Each of these options will require technological updates which Zimcom believes the company can support. It therefore views the implementation of the new IMO 2020 rules as a strong growth opportunity.
Today’s gains see the Zimcom share price recover from its trading lows over the previous 12-month period. Its shares fell from 12 cents last February to a low of 4 cents in the coronavirus market meltdown of March.
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Motley Fool contributor Gretchen Kennedy has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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