Brokers note

Adacel Technologies, ADA.AX, Buy


Pipeline looks strong
ln this note we analyse the pipeline of Adacel Technologies (Adacel) post some of the
tender details provided in the recently released investor presentation. The key tenders
where we see potential or likely success for Adacel include:
. US Navy: Several tenders for the purchase of ATC simulation systems over the
next three years totalling US$25m. US Navy is already a customer of Adacel and
the company's track record with the US Air Force and FAA suggests Adacel will
win most or all of these tenders.
. DSNA: A tender for the purchase of two ATM automation systems by the DSNA
(French air traffic authority) for Martinique and Guadeloupe. Adacel won the first
tender for an ATM system in French Guiana and we believe the company is well
placed to also win the next tender which should be decided by the end of 2016.
ln addition to these specific tenders we also note there is continued strong demand
from the FAA for more tower simulators and there is also the potential for a flurry of
purchases before the September financial year end by US Government and Defence
organisations. We therefore conclude the pipeline looks strong and we anticipate
some news flow of contract wins over the coming months.
No change in forecasts
There is no change in our forecasts. We forecast double digit EPS growth for the next
three years (FY17-FY19) which we believe is supported by the strong pipeline. Our
FY1 7 forecasts are also consistentwith the guidance of growth in both Systems and
Services revenue.
lnvestment view: Maintain BUY, PT $3.75
We maintain our BUY recommendation on Adacel. We only recently updated our price
target of $3.75 and there is no change. At this PT the total expected return is >30%
which well supports a BUY recommendation.
Enterprise value $205.4m
Market cap $22'1.2m
lssued capital 79.3m
Free float 48o/o
Avg. daily val. $593,755
12 month price range $0.95 - $3.55