The following is an excellent investment thesis on AVA from...

The following is an excellent investment thesis on AVA from Patrick Melville, Freelance Writer at Rask Australia (published 19-Jan-2021): Epic post: Everything you need to know before investing in AVA Risk Group Ltd (ASX: AVA) shares.

Below I want to share some interesting points regarding the IMOD Contract:

Recent FFT growth – IMOD contract

A significant contract win recently has been a large-scale supply of AVA’s Secure Link technology to protect more than 40,000 km of data communication cables for the Indian Ministry of Defence (IMOD).

Given the nature of the project, there’s quite a bit of information that hasn’t been disclosed to the public.

But we do know that the project is covering one of the world’s largest closed user group data networks, exclusively used by more than one million military personnel.

By the end of the contract, it will have generated approximately $16.7 million in revenue. The deal was announced back in 2018,

but revenue will continue to be recognised on AVA’s financial statements until the fourth quarter of 2021.

After the contract ends, AVA will still be able to generate IMOD revenue through an additional maintenance contract with estimated further revenues of $4.8 million.

One of the most important aspects to note from the IMOD contract is exactly how the project is being carried out and its effect on AVA’s bottom line.

Rather than AVA paying to manufacture the detection systems and distributing them to its client as it would normally do, AVA has partnered with an Indian manufacturing partner, SFO Technologies, which is responsible for the whole manufacturing process, associated working capital, and delivery under the contract.

AVA has been receiving a licence fee for each system supplied for the project. This means revenue generated is essentially on a 100% EBITDA margin, as AVA is not responsible for the cost of goods sold (COGS) in the manufacturing process.

You can read the full article here: https://www.raskmedia.com.au/2021/01/19/ava-risk-group-ltd-asx-ava-shares/