ADA Update - Thesis On Track, page-6

On the business model:

"Over the past four years, the Company has strategically expanded its business from a predominantly products-based company to an end-to-end provider of air traffic management and air traffic controller training systems products and services. The majority of the Company’s clients in both of these areas tend to opt for ongoing and typically multiyear support contracts."
Regarding the simulation business:

"A significant characteristic of these relationships is the service and support component provided by the Company which ensures that the critical training systems are always operating at their peak capabilities."


This is what the market is missing. Recurring revenue is now a big part of this business and growing. Im glad they have started to highlight it, but it needs to be highlighted more. Hopefully in their AGM presentations.


Management have done a great job of transforming the business model over the last four years. Once the market realises this there should be an accompanying multiple expansion.

It currently trades on about 9-10x next years earnings.

What multiple should a software business with 50-60% recurring revenue, $8m net cash, market leading positions operating in a rapidly growing market trade at?

I suggest it is much higher than 9-10x.