Canaccord new research: rates FFT BUY with 25c price

Can you guys access this? https://www.dropbox.com/s/wtbu1i0xygjhk19/FFT%20Future%20Fibre%20Technologies%20-%20COLT%2001.03.18.pdf?dl=0 Earnings profile looking more secure Future Fibre Technologies (FFT) is an established provider of fibre optic intrusion detection systems, which detect and locate perimeter intrusions, oil and gas pipeline interference and data network tapping. The company recently acquired MaxSec Group (MSP-ASX), which has complimentary products and services and provides a broader product offering, cross selling opportunities and cost synergies of ~$1m. Together with improving demand for security globally and FFT’s new product suite, the company has a solid platform for growth. Revenue guidance on a combined basis for FY18 is for $26-$33m. Together with synergies, we are forecasting FY19 EBITDA of $4.5m. With a market capitalisation of $25m and cash of ~$10m, FFT is trading on an FY19 EV/EBITDA multiple of 3.5x. We initiate with a BUY rating and a Target Price of $0.25 per share. Key points Well established with competitive advantages. FFT has been operating since 1994 and in the last ten years has deployed over 1600 of its fibre optic based systems in over 65 countries. FFT’s main competitive advantage is around high level sensitivity coupled with a low level of nuisance alarms. FFT’s systems are also able to pin point the intrusion within a metre (in most cases) and have been proven in the harshest of environments ensuring reliability and accuracy. Demand outlook is improving. The ongoing threat to critical infrastructure, stemming from terrorism has been a major driver of demand recently. Automation and the shift away from physical security to reduce costs is another. FFT are seeing its tender pipeline increase in the past 12 months particularly with the release of its new product release of the Aura Ai, which utilizes the latest optical signal processing algorithms combined with artificial intelligence, to offer customers the most advanced detection system. Merger delivers broader product suite and growth in secure logistics. The merger with MSP provides FFT with a more diversified business adding access control to its product offering and a secure logistics business. MSP’s access control division, BQT, is one of the leading high security Access Control companies in Australia and will be very complimentary to FFT. MSP’s secure logistics business, AVA, while in the early stages of development, is on a high growth trajectory and is addressing a significant global opportunity by a proven management team. Strong growth outlook. We are forecasting strong growth across the business in FY17- FY20 with revenue increasing from $12.9m to $47m over this period. In terms of EBITDA, in FY18 we are forecasting a small profit of $0.8m. The underlying profitability of FFT and BQT is masked by losses incurred from the relatively new AVA business. With this division becoming profitable in FY19 our group EBITDA estimates increase to $4.5m. Valuation and recommendation. We value FFT at $0.25 per share. This is based on an FY19 EV/EBITDA multiple of 8.5x. FFT currently has an EV of ~$15m and is trading on a multiple of 3.5x. We think a higher multiple will be ascribed by the market as profitability materialises and the growth in the business becomes evident. We initiate with a BUY rating.