Volatus Aerospace is a buy, post-merger: Ventum

The merger-of-equals is complete and Ventum Capital Markets analyst Rob Goff likes what he sees from the new Volatus Aerospace (Volarus Aerospace Stock Quote, Chart, News, Analysts, Financials TSXV:FLT).

On August 30, Volatus and Drone Delivery Canada announced that they had completed their previously announced merger. Subsequently, Volatus would delist from the TSX and Drone Delivery Canada would change its name to Volatus Aerospace and the resulting entity would list of the TSXV under the ticker symbol “FLT”.

“Our transformative merger of Drone Delivery Canada and Volatus marks the next major milestone for the company,” said Volatus CEO Glen Lynch. “Back when Volatus transitioned from a private company to a public company in 2021, we reimagined our mission to be an integrator and consolidator of a fragmented industry — to build a streamlined and agile ecosystem for our customers. Volatus is taking the next evolutionary step with Drone Delivery Canada, combining its significant technological expertise together with our commercial experience to provide tested and proven remote operational capabilities and logistics technology to our customers.”

Goff says this merger sets up success.

“The merger combined complementary technology (with significant IP), platform capabilities, and commercial visions with strengthened stewardship,” he wrote. “We see Volatus capturing a leadership position in the Unmanned Aerial Flight (UAF) sector where the long-line inspection and surveillance opportunity is set to redefine expectations. The longer-term potential for B2B drone deliveries remains attractive; however, we look for much slower traction as regulations mature. Volatus is well-positioned to capitalize on a Serviceable Obtainable Market (SOM) forecast at US$1.8B in 2027.”

In a research update to clients September 9, Goff maintained his “Buy” rating and price target of $0.38 on Volatus, implying a return of 137.5% at the time of publication.

Goff thinks the company will post and EBITDA loss of $2.7-million on revenue of $27.0-million in fiscal 2024. He expects those numbers will improve to EBITDA of positive $5.0-million on revenue of $55.0-million in fiscal 2025.

“With the merger ratio at 1.785, our prior $0.68 PT on VOL shares equates to $0.38/FLT shr,” the analyst added. “We are leaving our PT unchanged with the merger although factoring in the exchange ratio. Given the strategic and operational advantages, we believe the merger will drive greater shareholder returns. We see the opportunity to move our PT ahead as FLT delivers integration savings and demonstrates increasing revenue momentum across 2025 while building positive EBITDA to exit generating FCF. The greatest incremental gains lie beyond the NTM with B2B cargo delivery gaining traction.”