Buy Avante (TSX:XX) for a 125% return, Beacon says

There’s big upside in security player Avante Corp. (Avante Stock Quote, Chart, News, Analysts, Financials TSX:XX).

So says Beacon Securities analyst Gabriel Leung. On March 3, Leung initiated coverage of XX with a “Buy” rating and a 12-month target price of $2.25, implying a return of 125% at the time of publication.

Leung gave a brief overview of what the company does.

“Toronto-based Avante Corp. is a leading provider of security operatives and technology enabled security solutions to residential and commercial clients,” he said.”For over 25 years, Avante has been managing risk and providing advanced security solutions for high net-worth homes (largely in the GTA), high profile individuals and high-profile businesses. The company’s mission is to deliver an elevated level of security globally with white-glove mentality through advanced techenabled solutions and methods of detecting conditions that require immediate response.”

The analyst says the company’s days of underachieving are clearly over.

“In 2018, under a different management team, Avante pursed a strategy of adding (lower margin) physical security services to commercial customers,” Leung wrote. “However, with the return of Avante founder Emmanuel Mounouchos as CEO in 2022, the company divested this business line, re-focused on core competencies, optimized operations, and introduced new technology and products to increase protection for Avante’s clients and their property and expanded its international presence via the acquisition of NSSG. The results of the team’s efforts are highlighted by recent FQ3 results (ended December), which included 21% and 74% y/y organic revenue and EBITDA growth.”

Leung thinks the company will post Adjusted EBITDA of $2.0-million on revenue of $32.7-million in fiscal 2025. He expects those numbers will improve to Adjusted EBITDA of $2.4-million on a topline of $35.4-million in fiscal 2026.

“Our positive investment thesis around Avante revolves around several observations: With crime rates at elevated levels within Avante’s geographic focus areas, so too should demand for its core services,” the analyst argued. “Aside from its traditional services, we believe the sizzle to the Avante story could come from contributions from new lines of businesses, including NSSG, advanced surveillance and analytics through HALO, and mobile monitoring through WALL-E, which we believe significantly expands Avante’s addressable market opportunity. We view Avante’s business as relatively recession resilient
providing good forward growth visibility.”