Investors should buy Avante Logixx (TSX:XX) in advance of what is expected to be a strong second half to its fiscal year, says Paradigm Capital analyst Spencer Churchill.
Last Thursday, Avante Logixx reported its Q2, 2015 results. The company earned $157,740 on revenue of $2,213,782, an increase of 3.2 % over the same period last year.
Co-CEO George Rossolatos focused on the company’s recent acquisition.
“The acquisition of INTO is already making a significant positive contribution to activity levels and cross-selling opportunities,” he said. “The full effect of the synergies will be seen over the coming quarters. The group has a significant order backlog for security systems installations, both in high-end residential and condo/commercial real estate sectors. We expect to see increased revenue run rates from installations, as well as recurring revenue for the remainder of the fiscal year.”
Churchill says the results were in line with his expectations. The analyst says he is encouraged by the company’s strong growth in recurring revenue, which now represents nearly half of its total topline. He notes that the INTO acquisition contributed just five weeks of performance in the second quarter, adding $300,000 in revenue.
The analyst says Avante Logixx’s quarter was dampened by “lumpy” international travel security revenue, but that the second half of the company’s fiscal year is looking strong, as management noted that activity levels have increased, with October’s revenue topping all of the second quarter’s.
“We maintain our positive stance and would be buyers in advance of much stronger results in H2 (surge in international service and full contribution from the INTO acquisition) and the potential for further acquisitions,” said Churchill.
In a research update to clients yesterday, Churchill maintained his “Buy” rating and $0.65 one-year target price on Avante Logixx, implying a return of 141% at the time of publication.