Analyst Report: Taurus Securities Limited state that Avanceon is submerged in a plethora of contracts
Taurus Securities Limited recently released their analysis of Avanceon’s financial situation based on briefings with the board and they outline the following reasons behind their recommendation to buy stock. From the report itself:
Key Triggers to support investment case include:
- Company’s strong foothold in the Middle Eastern countries where it expects revenues in excess of USD35mn on the back of strengthening macro economic factors and infrastructural works for the upcoming FIFA world cup 2022. Con- tracts for Qatar Rail (USD7.5mn as of now) would remain the significant con- tributor. Due to hefty capital requirements, AVN is likely to raise funds through equity, going forward.
- Growth prospects in the domestic industries opening up further avenues for Avanceon. To note, 50% of the revenues flow in from the domestic market with a major chunk from Oil & Gas sector followed by Food & Beverage, FMCG’s and Cement. Burgeoning POL products demand (~5% CAGR till 2020), setup of three more LNG terminals, rapid development in infrastructural works justify a boost in automation demand.
- Stepping into new ventures such as Building Management Systems and the in- troduction of Cloud Computing and Remote Monitoring technologies for the ser- vice sector. Revenues worth PKR250mn are expected to be generated in the course of 3 years.
- Exalted gross margins ranging from 33% to 41% in the past 5 years. The man- agement feels confident that margins would stay in the same ambit with that from the recent Qatar projects exceeding 40%. Moreover, a 30% growth in top- line for the next couple of years along with materialization of Qatar Rail pro- jects in CY19 would lead revenues to cross the PKR5bn mark.
- The company’s run-rate (projects currently in pipe-line) of 20 months ensure a consistent top-line even in the absence of further contracts (though that seems unlikely).
- Avanceon’s partnership with multiple local and International vendors including Rockwell Automation, Belden, Microsoft etc. making it the official distributor/ systems integrator.
The full report is uploaded for your attention here: Avanceon Taurus Securities Limited Analyst Report April 2017