Adacel's Growth Continues
In January I published this note <a href="https://www.livewiremarkets.com/wires/30291" target="_blank" data-event-type="click" data-event="link_click">(VIEW LINK)</a> stating the view that Adacel (ASX:ADA) was trading around fair value but that numerous opportunities existed for earnings upgrades and for the impressive growth story to continue. Last Friday Adacel announced another profit upgrade for FY16, guiding to 70% growth over FY15 (previous guidance was for 50% growth). That equates to an upgrade to PBT from A$9m to just over A$10m. The company also gave guidance of A$5.8m-$6m for 1H16.
The reasons for the FY16 upgrade were cited as expanding opportunities across the existing ATC simulation base, migration of customers from the acquired CSC business to MaxSim, upgrades for large ATM customers, orders being received earlier than expected (leading to a strong 1H) and a marginally better AUD/USD exchange rate.
Adacel is growing rapidly, is the leader in its field, has a significant net cash position and is well managed with favourable market tailwinds to continue for the foreseeable future. We expect the next leg up in the share price will coincide with Adacel indicating to the market that FY17 will represent growth over FY16 and if that occurs there is likely to be more upside. It’s also worth noting that ADA, a takeover target in the past, must be looking quite attractive to a number of potential acquirers.
Adacel is the second largest position in the Capital H Fund.
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Co-founder of HD Capital Partners and founder of Capital H Management. Portfolio Manager of the Capital H Inception Fund.
Previously worked for Pie Funds and Bligh Capital.
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HD Capital Partners
Co-founder of HD Capital Partners and founder of Capital H Management. Portfolio Manager of the Capital H Inception Fund. Previously worked for Pie Funds and Bligh Capital.
Expertise
HD Capital Partners
Co-founder of HD Capital Partners and founder of Capital H Management. Portfolio Manager of the Capital H Inception Fund. Previously worked for Pie Funds and Bligh Capital.
Expertise
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