14-Jan-2021: As @Rapstar has mentioned here in both the AVA General Forum and in his "Services Division" Straw for AVA today, AVA is held by DMX Capital Partners, a division of DMX Asset Management. Their monthly newsletters are free to access from here: https://www.dmxam.com.au/monthly_archive.html
I do see that in their September 2020 newsletter that they've said:
Management meetings
We are pleased to share below a summary of our notes and insights taken from meetings with management of several of our disclosed portfolio positions. We share these insights to showcase four of our holdings where we feel our discussions with management have highlighted some interesting aspects to the business, that are perhaps not well understood by the market.
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AVA Risk Group (ASX:AVA)
Meeting with David Cronin (Chairman) and Rob Broomfield (CEO)
As previously noted, FY20 was a big year for AVA, as it delivered an impressive turn-around. In speaking with management, we were keen to focus on FY21 and whether that momentum could be sustained. Key insights are discussed below.
- AVA’s logistics business (“Services”) recorded $3m sales in July 2020, with EBITDA in excess of 15% (compared to FY20 EBITDA of ~9%). Management confirmed they expect revenues to remain strong for the remainder of FY21, as it benefits from the full year contribution of client wins during COVID-19 (in 4Q20). AVA also expect Services to maintain its EBITDA margin of ~15% for the balance of the year. With the Services business due to be sold in the next 12 months, Management are looking to target an EBITDA sale multiple of 9x to 12x, given the capital light nature of the business. AVA are happy to take a commercial approach in relation to the timing of the sale in order to maximise the sales price.
- Technology revenues for FY21 are tracking ahead of the same period in FY20, while management continue to expect at least $11m from its Indian Ministry of Defence (IMOD) contract this year (at close to 100% margin).
- A key feature of the FY20 result was the margin expansion resulting from both revenue growth and reduced operating expenses. AVA expect to maintain FY21 OPEX at similar levels to FY20.
- Management are particularly excited about the progress they are making with their powerful fiber optic technology. We believe this is a key part of the AVA thesis that is under appreciated by the market. AVA are positive about the commercialisation of AuraIQ (using fiber optic cables for conveyer belt monitoring) where one potential deal is currently progressing its way through a customer’s CAPEX approval process. In addition to AuraIQ, AVA has been applying its fiber technology capabilities incrementally into other non-security applications such as condition monitoring for roads, rail lines and power cables. Potential distribution partnerships are being worked on for some of these use cases that are in early stage validation. One such example is monitoring the impact of wave motion on power cables in the Hudson River in New York.
- Management expect publicity around a similar focused company, chaired by technology entrepreneur Bevan Slattery, to drive further interest in what AVA is doing with its fiber technology.
In summary, we took a lot of confidence from our meeting with AVA. Its Services division has significant momentum, and when sold, we think has the potential to generate sales proceeds to AVA of $50m to $60m (before Management profit share is accounted for). Its technology business will grow in FY21 underpinned by the IMOD contract. AVA’s fiber technology offering perhaps hasthe most upside, and its potential least appreciated by the market, but we acknowledge it will take some time for this potential to play out.
--- end of excerpt --- [to read the notes/insights from DMX's other 3 company management meetings (with PTB, EGH & UCW), click here.]
While I can't find any reference in there (or in any of their newsletters) to AVA extending their own management performance plan termination date to June 30, 2021 (from Feb 1, 2021), I'll take @Rapstar's word for it; it sounds right. I do note that they (DMX) stated: "With the Services business due to be sold in the next 12 months, Management are looking to target an EBITDA sale multiple of 9x to 12x, given the capital light nature of the business. AVA are happy to take a commercial approach in relation to the timing of the sale in order to maximise the sales price."
Onwards and upwards then.
During the past 12 months, DMX have mentioned AVA in their February, May, July, August, September and October newsletters - all can be accessed from here.
Their December newsletter had not been uploaded to that webpage when I typed up this straw, but I expect it will be shortly, once they publish it.
[I hold AVA shares.]
