Asymmetric Opportunity, page-3

https://mcusercontent.com/d4810c866782736c5a825b67e/files/634f4eeb-e31c-4e1b-8483-dc81b6a1247c/Canaccord_Colt_AVA_12052020.pdf

Canaccord:

AVA reported a solid quarterly result that showed continued revenue growth and
an improvement in cash flow. This reaffirms our view that FY20 is shaping up for a
significant uplift in profitability. With a growing pipeline of opportunities ahead of it in
FY21 and a significant amount of cash flow to come from the Indian Ministry of Defence
(MOD) project, it’s very likely we’ll see more of the same next year. Although Covid-19
has resulted in some delays to orders, revenue guidance was provided of $43m, which
is more or less in line with our expectations. A mix shift however has resulted in EBITDA
guidance (more than $5m+) being below our estimate for $6.3m. Consequently, we
have reduced our FY20 EBITDA estimate by 9% to $5.7m. With AVA Logistics gathering
momentum, the Indian MOD contract beginning to deliver significant revenue, an
order backlog of ~$16m, and the likely commercialisation of the Aura IQ, we have made
upgraded our FY21 EPS by +17%. Together with a roll forward of our valuation, we have
lifted our Target Price to $0.30 per share. We retain our BUY rating.