3 to 4mill full year profit: big upside

Yesterday Adacel announced that it expected to record a full year profit, with the June half result coming in higher than the Dec half result. Since the Dec half result was $1.5mill, the full year result should be above $3mill.

If management give a positive outlook when the full years results are released (and I expect they will – see my earlier posts), then Adacel is likely to start trading over FY07 on a PER of around 20 (as earnings could easily increase by 60-80% over 07). Assuming a 06 full year result of $3mill, this suggests that Adacel's sp will settle at around 69c in a few months. But assuming a full year result of $4mill, Adacel's sp is likely to settle over the medium term at around 92c.

In any event, if the big FAA contract that I've been speaking of (see earlier posts) comes through, the sp should head towards $1.

While there is always the risk of contract delays with a company like Adacel, right now things are looking very good.