For those who might have missed it, on Feb 28 Adacel received a...

For those who might have missed it, on Feb 28 Adacel received a second contract from Airbus. Under these two contracts, Adacel has started to provide a wide range of simulation tools for Airbus product development/testing teams. In dollar terms, these initial contracts are relatively small, but they are strategically important because they provide Adacel with an ongoing, working relationship with a company that (1) is presently the largest aircraft manufacturer in the world, and (2) has a huge appetite for simulation/software products. The medium term goal is for Adacel software/sim tools to be included in next gen Airbus Full-Flight-Simulators (and possibly to be retrofitted into existing FFS manufactured by third parties). If this goal is achieved, Adacel will receive ongoing licensing revenue in the 10s of millions of dollars. Longer term, the aim is for Adacel's software to be included in FFS for aircraft made by other manufacturers such as Boeing.

My guess is that the half year results will be released either tomorrow or Thursday. At the AGM, the Chairman said (in his typical, understated way) that Adacel's US arm booked an operating profit in the US Q1. If the US Q2 was similar to the first (US results are not released publicly), then this week should see Adacel post its first profit since 2002.

After 4 years of posting heavy losses, Adacel has an extremely beaten down share price, so there is significant upside potential should the company return to profitability and give a generally positive outlook. For example, even a small half year profit (<$1mill), should see Adacel trading at around 65c by the end of next week, and a larger half-year profit ($1-2mill) should see Adacel consolidate at around 85c.

Whatever the Dec half number, given the quantity of contracts won recently, there can be little doubt that the June half will be even better, so the full year is looking very good. As I've said previously, I see Adacel posting a full year profit in the region of $4-5mill. A $4-5mill full year profit (with a positive outlook, backed by new contract wins) should give Adacel a market cap in the region of $100mill (=$1.15 sp) by November of this year.