Last week Thorney bought 2.1mill ADA shares at 43c, and thus...

Last week Thorney bought 2.1mill ADA shares at 43c, and thus increased its ownership of the compnay from 34% to just under 37%.

Thorney has a representative on Adacel's board, and Adacel's board is now extremely pro-active in managing the company, so one would have to assume that the recent decision by Thorney to buy at 43c is based on management confidence about new contract wins in the short term as well as solid profitability this FY.

A bill passed in the US Senate three days before Thorney purchased its 2.1mill shares mandated that the security at all chemical plants in the US be upgraded in the short term. This bill provides an opportunity for Adacel to sell its homeland security simulation products (via its relationship with Lockheed Martin) this FY on a very large scale. And at the AGM, Adacel's new CEO (Fred Sheldon) said he was confident of selling Adacel's homeland security products (again via Lockheed Martin) to the agency managing the New York subway system. Already, Adacel's security simulation products have been sold to one of the US's most secure installations, viz., the Sandia Nuclear Research Facility.

I also suspect that Thorney recognises that Adacel is increasingly becoming a takeover target for Lockheed Martin (mainly because of Adacel's air traffic management division). Thorney and Silvio Salom do not need to sell, so Lockheed Martin would have to pay full price to gain control. On the assumption that the company is likely to generate around $4-7mill in profit per annum in the foreseeable future (i.e. over the next few years), I see the company fully valued for the foreseeable future at around $140mill or $1.60 per share.

That Thorney sees 43c per share as a bargain comes as no surprise to me.

Adacel's December half results should be released to the market in around 6 weeks.