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Research: Industrials
Following its acquisition of Clyde Space earlier this year, ÅAC appears to have made solid progress in H118. Sales have expanded for the ongoing businesses and the order intake for the whole group looks encouraging. Satellites are being delivered for deployment in H218 and orders for a number of demonstration projects have been received. A global leader in small satellites, it supplies fully integrated missions and platforms as well as subsystems/components to third-party satellite builders and operators. As such, ÅAC remains well positioned to participate in the expected rapid growth of the market over the next decade.
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ÅAC Microtec |
On the launchpad
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Aerospace & defence |
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23 August 2018 |
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Following its acquisition of Clyde Space earlier this year, ÅAC appears to have made solid progress in H118. Sales have expanded for the ongoing businesses and the order intake for the whole group looks encouraging. Satellites are being delivered for deployment in H218 and orders for a number of demonstration projects have been received. A global leader in small satellites, it supplies fully integrated missions and platforms as well as subsystems/components to third-party satellite builders and operators. As such, ÅAC remains well positioned to participate in the expected rapid growth of the market over the next decade.
H1 results robust despite project issues
H118 results included the consolidation of Clyde Space from February, adding SEK24.1m in sales and contributing a net loss of SEK3.2m to the group. The ongoing activities thus generated sales of SEK14.4m, up 65% on H117 (SEK 8.8m), generating a net loss before goodwill depreciation of SEK14.2m (H117 SEK11.5m) implying a modest improvement for the ongoing activities. The group’s EBITDA loss was slightly higher in the period at SEK9.3m (H117 SEK8.9m) having been adversely affected by challenges in one of the larger projects in Q218. Management expects the issues to be resolved in the short term. Gross cash at the period end of SEK38.7m was up SEK1.4m as funds raised in Q118 offset a higher operating outflow and the SEK22m cash component of the Clyde deal.
FY18 guidance maintained
Management has confirmed the first-half performance allows it to reaffirm guidance for FY18. As before, group revenue is expected to reach SEK85m, with a positive EBITDA expected in Q418. With a positive book-to-bill ratio in Q218, the outlook beyond this year also appears to be developing positively. Demonstration projects with two to four small satellites being launched by operators are the current driver of demand, and these are largely for potential future deployments of constellations. During H118 several major orders were announced including additional subsystems for York Space Systems S-CLASS satellites, as well as for operators in Spain, Japan, South America and the Ukraine. Further orders have been received from Japan and Canada since the half year.
Valuation: Positive EBITDA should be a catalyst
The move to generating a positive EBITDA should focus the market on the potential pace of growth for ÅAC into the next decade. We would still expect the medium-term EV/EBITDA multiple to converge towards the peer group rating of around 10x.
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Consensus estimates
Source: Company reports, Bloomberg consensus estimates (one provider) |
ÅAC Microtec is a research client of Edison Investment Research Limited
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Disclaimer
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Disclaimer
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Elk Petroleum (ELK) has completed a period of material inorganic growth with the acquisition of equity in the Madden gas field and assumption of operatorship at the Aneth CO2 enhanced oil recovery (EOR) project. ELK’s engineering review of Aneth has uncovered numerous near-term development opportunities that offer IRRs ranging from 22% to 87% at US$60/bbl WTI, at an average cost of US$6.8/boe. Projects are low technical risk asset enhancements, however, contingent on ELK’s re-financing expected in H2 CY18. ELK’s partner in Aneth, Navajo Nation Oil and Gas company (NNOGC), gained access to a US$80m debt facility in June 2018 to fund its share of Aneth development capex. Our risked valuation increases from A$0.12 per share to A$0.19 per share (61%) driven by the inclusion of near-term development potential, as well as higher short-term oil prices that we base on EIA forecasts (in the long term we remain at US$70/bbl). Funding of identified growth projects and refinancing of the company’s complex capital structure are key management objectives for CY18.