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10
Avante Logixx is building up for the long-term
Posted by: Gerry Wimmer
8/10/2014
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TOP IDEAS: Acquisitions are becoming part of Avante Logixx Inc. (TSXV: XX) growth plans.




Investorfile’s share price accumulation target of $0.40 for Avante Logixx Inc. was reached on January 7, 2014. For the record, we do not revise share price targets for our Investorfile Top Ideas - Small Cap Value Stocks. We have positioned our blog to be one of the first providers of a pragmatic perspective of a small cap company stock's potential worth, where there may be uncovered value that has been largely overlooked by the investment community.


Over the past few years Avante Logixx Inc. (TSXV: XX - $0.28) has gone through several phases to create shareholder value.

First, there was the turnaround phase, where a new co-CEO and major shareholder (George Rossolatos), committed to renew Avante’s focus in servicing the security market which had stable revenues in order to stem the Company’s operating losses. The strategy was that with the appropriate management attention and resources, the Company could grow profitably and pay back all of its bank debt.

That was accomplished two years ago.

The next phase saw Avante scale up its business organically as a full-service security firm by growing sales across all of the Company’s product lines while improving gross margins. The Company also steadily increased its recurring revenue stream generated from monthly security monitoring fees, which generated a cash position to fund future growth. At the end of fiscal 2014 (March 31), Avante’s annual sales grew to $8.96 million, of which 35% was recurring revenue. At this point the market took notice and the Company raised some capital too.

Avante provides best-in-class residential and commercial security services including system design and installation, rapid alarm response, alarm monitoring, video analytics and secure transport through the use of advanced technology and a focus on client service.

At this time Company management believes that there are significant opportunities for growth by consolidating the security industry to further improve its market share and operating efficiencies, which would result in increased profitability. With about $7 million of cash in the bank, Avante has initiated a long-term plan - a new phase of growth which includes acquisitions.

To this plan Avante announced the Company’s intention to acquire INTO-ELECTRONICS to close later this month. INTO-ELECTRONICS, based in Toronto, has developed a specialized skill set in commercial and high-rise security integration, monitoring and electronic building management. INTRO-ELECTRONICS generates $2.5 million in revenues annually of which 33% is recurring. Avante will pay $2.8 million for INTO-ELECTRONICS, $2.4 million in cash with the reminder in stock. Avante management has stated that this acquisition will be immediately accretive to the Company’s earnings upon closing.

In addition to the above acquisition, Avante management has indicated they have identified numerous other acquisition targets of varying sizes. We anticipate that one or two more companies (similar in size to INTRO-ELECTRONICS) could be acquired by Avante within its current fiscal year, funded from existing cash resources and, if necessary, from available debt capacity. This potentially could double the size of the Company over the next 12 months.

Since our initial blog post (See: Avante Logixx: Post-turnaround stock provides value for growth investors), the shares of Avante had exceeded our price accumulation target of $0.40 earlier this year but has retreated since. That said, we reconfirm our $0.40 target. In our opinion the stock price does not reflect the Company’s capacity to close on several acquisitions. We note that Avante’s co-CEO George Rossolatos has considerable M&A experience from a previous position.

If Avante's long-term growth phase shows signs of early success, the stock price could appreciate significantly above the $0.40 level.

Avante has approximately 71.6 million shares outstanding.

Avante Logixx website: www.avantesecurity.com

Author Ownership Disclosure: TSXV: XX - Yes


Read Disclaimer:

This article is for informational purposes only. This article is based on the author's independent analysis and judgment and does not guarantee the information's accuracy or completeness. The information contained in this article is subject to change without notice, and the author assumes no responsibility to update the information contained in this article. The information contained within this article should not be construed as offering of investment advice. Those seeking direct investment advice, should consult a qualified, registered, investment professional. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock.

Investorfile.com is not engaged in an investor relations agreement with Avante Logixx Inc. nor has it received any compensation from Avante Logixx Inc. for the preparation or distribution of this article.

The author of this article has acquired and may trade shares of Avante Logixx Inc. through open market transactions and for investment purposes only.

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Hi Gerry, Your philosophy is focused on principles that have been shown to produce above average results over time and your record has clearly proven that. Congratulations on a great blog and thank you for the hard work that you do in sharing and updating your ideas; it is much appreciated.