Jump to content

ADA - ADACEL TECHNOLOGIES LIMITED


jbeatty

Recommended Posts

This looks like it could be a big coup for Adacel:

Boeing receives $1.7bn FAA contract for NexGen

Boeing (NYSE:BA - News) has won a major research & development support contract worth up to $1.7 billion for the Next-Generation Air Transportation System (NextGen) from the U.S. Federal Aviation Administration.

 

Prime focus areas of the contract include air traffic management modeling and simulation as well as the full integration of ground and airborne technologies and operations across all vehicle types, including commercial and military aircraft, general aviation, unmanned aerial systems, and rotorcraft. Boeing will perform work that will demonstrate NextGen procedures in real time on a large scale within the current air traffic system.

 

..and the relevance to Adacel?

The Boeing team also includes Adacel, Ensco, Embry-Riddle Aeronautical University, Harris, Honeywell, Jeppesen, Jerry Thompson & Associates, Mosaic ATM, Spectrum Software Technology Inc., Tetra Tech AMT, and the Washington Consulting Group.

 

 

 

Link to comment
Share on other sites

  • Replies 365
  • Created
  • Last Reply

Top Posters In This Topic

Top Posters In This Topic

Posted Images

Thanks for that Lizard.

 

 

Anyone heard who it was that approached Adacel with an offer to buy them out?

 

I'm a bit surprised that it has all gone quiet, because a rebutted initial approach does not usually deter a suitor as cleanly as the current share price suggests.

Link to comment
Share on other sites

  • 1 month later...
Guest tonyv

Remlif,

The AFR said (I think on July 7th) that according to rumours a private Group was interested in ADA. So perhaps not one of the big players as we might have first thought. The company did say several parties had shown an interest however. I'm not overly worried about a loss this year (although a profit would be better) as I feel thats its real profitabilty is hidden by very high rates of reinvestment in technology development.

I think management is very good, balance sheet strong, world leaders in important technology. But not necessarily a company you would want to invest in if you want certain EPS or dividends.

 

Tony.

Link to comment
Share on other sites

i have posted this comment a few years ago about ADA, but it still rings true,......................

 

all ADA has to do for their end of financial year market ann. is change the date on the letter head.

for the past 10 years they have said exactly the same thing, delayed contracts, etc.

 

The thing with ADA is their market is too small, although they are good at what they do,

there are not enough customers in the specialised field in which they operate

Link to comment
Share on other sites

  • 3 months later...
  • 3 months later...

Hi Fellow Adacel Followers (diminishing group that we are),

 

The results strike me as largely mundane, but interesting in parts.

 

The mundanity flows from two basic facts: first, that this report is now virtually the totality of information we receive; and second, that the profit was miniscule, the revenue disappointing, and the comments prosaic.

 

I did, however, find it interesting that the company can suffer a decline in revenue, a soaring Aussie dollar, and contract delays (again!!!), and yet still fund its operations, its investment in intellectual property, and a buyback of sorts -- and it can do this without recourse to either equity or debt.

 

The answer is to be found in the very high margins the company now earns on its ongoing revenue stream (due, I would guess, to the strategic policy of placing advisory staff with clients). Obviously, this company does not invest in large plants, or in huge tracts of land; and it does not get caught with large and expensive inventories. It basically relies on its people and on the intellectual property they generate, and on the economies achieved by replication and roll-out of that technology across the globe.

 

I said once before that in the absence of detailed information from this company it is wise to focus on two key factors: debt and revenue. There is no problem whatsoever on the debt front. The revenue, however, is profoundly disappointing.

 

For some time I have thought that this small and innovative company would be an emergent growth stock. It was well situated in a genuinely global industry that was itself undergoing change that seemed to promise great benefits to a company so well situated. Moreover, the share registry was very tight, and so the number of shares would either remain static, or better still fall. In other words, if revenue increased significantly then the share price could be expected to rise by a far greater amount.

 

It now seems that there is no significant increase in revenue that we can expect any time soon. We now seem to be shareholders in a company that is not going to go belly-up, but is not going to earn significant profits -- or at least not any time soon. The future looks to be more of the same -- a long, long sideways movement in the share price. The edge is starting to go off it, I'm afraid. On the other hand, I shall continue to hang in.

 

Fred

Link to comment
Share on other sites

  • 2 months later...

Thanks for that post Fredsmart, I too, continue to hang on and hope.

 

Your comments summarize the situation quite well and there are one or two points that I would add on the plus side.

 

1. As you pointed out, their balance sheet is clean. Negligable borrowings. Also, zero intangible assets. They spend considerable sums on writing software (that is their business), but they don't let these costs accumulate on the balance sheet as an intangible asset. They write the cost off straight away. If they followed normal practice (our banks, Telstra etc), they could "trick up" their profitability to make themselves look much better than they portray with their headline profit/loss figures. I guess this accounting honesty comes from having 3 dominant shareholders all on the board who know what the company is really worth while the rest of us rely on the share price to give us a guide.

 

2. Also as you pointed out, we minor shareholders get told nothing. This doesn't mean that nothing is happening. It is worth regular visits to their web site and in particular their press releases. There are regular announcements of new contracts which would once have been posted as an ASX announcement. These are enough to indicate to me that the company is not stagnating.

 

One recent press release announces a beefing up of the board structure in the US. The reason, according to the press release is the sensitivity there to inviting a foreign owned/controlled company into the secretive areas of defense contracts. I recommend this as a read for holders as it goes some way towards explaining the darth of information we receive directly. It also points to pressures that could be a catalyst for future change. If the defense work grew to significant levels and was held back by the Australian ownership of the company, then another take over offer would most likely emerge. This may not be in a single step. It is plausible that Thorney could instigate a buyout of the minor shareholders, take the company private, and then sell it to a US based owner. If this were the plan, then, the lower the current share price, the better (for Thorney).

 

 

From my point of view, I am prepared to be patient and justify my patience by convincing myself that the current share price is a very poor indicator of the value of the company

Link to comment
Share on other sites

Hi Remlif,

 

I agree with everything you say.

 

With respect to the the policy of writing off expenditure on intellectual property in one hit, I believe that is an accounting standard. However, as you rightly say, it understates the real financial position -- and the guide to future profits -- of companies such as Adacel. I also agree that the company does appear to behave with honesty.

 

I, too, regularly visit the website. As you say, there are things there that once upon a time would have been appearing as an ASX statement. I think the website has these sorts of things because clients and others in the industry probably see it. I also look at the positions vacant section for an idea of how the company is travelling. The jobs do not appear to have dried up.

 

With respect to the three American notables on the Board, I think that, by itself, would satisfy the Americans. On that matter, however, I might very well be wrong. I did conduct a little search in order to find an answer to that question, but I still can't find anything definitive. The company's statement, however, does seem to imply that the three residents on the Board will clear the way for the future. That future, however, might be some way off. We do seem to be waiting a long while for contracts to materialise. This is despite the fact that the company refers to itself as a fast mover. I'm sure it is a fast mover, but I wish everything else would catch up.

 

I believe that there are some big contracts up for grabs in 2013, relating to the institutional arrangments between the Europeans and the Americans on emissions reductions between the US and Europe. With that in mind, I expect that we will all just have to hang in there.

 

The danger of getting out, of course, is that the turnover is so low that getting back in might be difficult if things start to happen. I always have in mind, too, that the nature of the industry is such that a large contract could come from nowhere and catch everyone by surprise. I'll be definitely staying the course, but I must say that it's a long slow ride.

 

Thanks for such a thoughtful post.

 

 

Fred

Link to comment
Share on other sites

  • 6 months later...

I tootled along to Adacel's AGM last Friday and I must say there was about as much activity and excitement about the company shown at that meeting as we see on this thread.

 

I was one of only 6 shareholders who fronted and we were outnumbered by the suits (board members, auditors, legal representatives etc) who counted to around 18.

 

Chairman Julian Beale made heavy work of reading his speech which was a repeat of what was issued to the stock exchange back in August. He then asked for questions. Perhaps he wished he hadn't. He was roundly abused. By one irate shareholder in particular.

 

The first question was about lack of information provided to the ASX for shareholders. To wit. An announcement in February 2011 that things were going great and then nothing till 22 June when we shareholders were told that everything was a mess. Whatever happened to continuous disclosure? Beale was very uncomfortable and struggled to put any coherent explanation together. Just an apology.

 

I asked whether there had been any turnaround in this financial year to date. He answered this trading was better and it took about 4 follow up questions to get him to state that the company was profitable in the year to date. I'm not sure I believe him or that he even knows.

 

The first questioner made a great issue of the continued lack of performance of the company since going public and questioned the board for its lack of diligence in pursuing their duties and responsibilities. Again he received apologies and not much else.

 

He then commented on the current shareholding weightings and the lack of communication with the minority shareholders not on the board. He asked whether the board had ever considered taking the company private and buying out the minorities.

 

The answer was probably the most interesting thing to come out of the meeting. "a meeting doesn't go by when this issue or some closely associated issue is not discussed"

 

The board was asked about why the take over offer a couple of years back fizzled away. The answer after several attempts to bat the question away was that negotiations were going nowhere and were involving an inordinate amount of management time and resources. Adacel called a halt.

 

After this meeting in which the entire board was subjected to fairly abusive questioning, I suspect that the question of going private will be discussed again.

 

 

Link to comment
Share on other sites

  • 2 weeks later...

Hi Adacel followers,

 

I've been thinking about Remlif's post.

 

The first thing that strikes me is that this buyback is the most aggressive so far. The company seems to be relentlessly lifting its price as far as the ASX regulations allow; and it is prepared to gobble up not just larger volumes, but even very small volumes. This suggests that that the company is very keen to acquire shares, and it is quite relaxed about moving the share price upwards as it goes about acquiring those shares.

 

That begs the question. Why? Why push the price up? Obviously, the company is not short of cash, despite lower revenue, and despite ongoing investment in intellectual property. Since it is able to do all of this --- and continue an aggressive buyback -- without recourse to either debt or equity, my conclusion is that this is intrinsically a very profitable little company. That is now, not just in the future.

 

The next question is another 'Why'? By this, I mean why has the annual report emphasised talk about 'rightsizing' the company, with all of the negative undertones that the term implies? This is a company that does not see any need to do investor presentations, or to contemplate ever going to the capital market. If this weren't the case, then the company would be putting a better spin on things.

 

Let me now consider the position of the Big Three. They might be contemplating a privatisation, but we don't know anything about the personal finances of two of those. We do know, however, that one sold a half a million shares. In other words, it is quite possible that one at least might have to participate by raising debt -- perhaps even from Thorney. That would be murky and would skate along a tight ethical line, but it would also entail some financial risk. What if the expensive offer didn't get the requisite 90% take-up? Where would that leave the debtor? I know that I wouldn't be prepared to sell my shares at anywhere near these prices when it was very clear that the directors believed that the shares were very cheap. If I were in charge of the current buyback, I would therefore be trying to acquire all shares that came on the market, and I would be very relaxed about the price at which I acquired them. Maybe that would entice suckers to sell out at a cheap (but higher) price that they didn't realise was cheap.

 

For my part, I think that the company is amazingly cheap. A little while back a Car Park technology company was ramped. It was capitalised at about $35m, and its annual revenue was about $1m. In other words, it was capitalised at about 35 times revenue. Adacel is currently capitalised at around 6 months of revenue, or 0.5 times revenue. You can bet that the car park co will have to issue more shares. You can also bet that Adacel's issued shares will continue to decline.

 

Adacel is leveraging a closely integrated suite of products, and it operates at a currency well above its long-term average and in a global market that is currently recessed but which offers large opportunities via SESAR as well as via the potential defence contracts that it has gone to some trouble to set-up.

 

I still think it's a buy.

 

Fred

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×
×
  • Create New...