Adacel flies above the pack

Published at Sep 21, 2016, in Features

The last 12 months has been one of the best periods in Adacel Technologies’ (ASX: ADA) history with important contract awards, a profit upgrade in July and the delivery of an above guidance fiscal 2016 result in August.

The leading global developer and provider of operational air traffic management systems, speech recognition applications and advanced air traffic control simulation and training solutions has strong relationships with leading aviation groups throughout the world.

ADA’s longest active contract is with NavPortugal and it spans 18 years. The group’s largest customer is Lockheed Martin and this accounted for revenues of US$11.1 million in fiscal 2016. The average term of current contracts is 8.3 years, demonstrating the company’s ability to retain business and deliver earnings predictability.

Of course anything can happen in this market and predictability can change, so seek professional financial advice if considering this stock for your portfolio.

ADA generated a net profit of $9.2 million in fiscal 2016, representing year-on-year growth of 134% and exceeding Bell Potter’s expectations by 8%. Importantly, net cash more than doubled to $15.7 million in fiscal 2016 leaving the company well-placed to tender for new business and maintain its leading position in the development of innovative technologies.

Bell Potter only initiated coverage of ADA six months ago with a price target of $2.50, but this gradually increased leading up to the group’s full-year result. After the company provided an update yesterday the broker maintained its buy recommendation and 12 month price target of $3.75.

While Bell Potter analyst, Chris Savage, noted that the company didn’t provide quantitative guidance yesterday he is of the view that general outlook statements which pointed to the depth and diversity of its order book and optimism surrounding earnings growth in 2017 were positive signs.

Savage is forecasting revenues to increase by circa 10% in fiscal 2017, and he is projecting earnings per share growth of 11% and 17% in fiscal years 2017 and 2018 respectively. A breakup of the company’s revenues across its various divisions in fiscal 2016 is outlined below.

As can be seen from the following table, ADA has managed to substantially grow both the systems and services divisions of its business over the last three years. With regard to fiscal 2016, Savage highlighted the strong performance from the services segment which grew year-on-year revenues by 30%.

He noted that this was mainly attributable to a new Controller Training Contract (CTC) with the Federal Aviation Authority (FAA) and also growth in existing services contracts with customers including the FAA and the US Air Force.

While the abundance of good news flow saw ADA’s shares surge from 95 cents 12 months ago to hit a high of $3.55 following the profit upgrade in July, they have tapered off recently, arguably due to broader market volatility.

This retracement could be seen as a buying opportunity given that Bell Potter’s price target of $3.75 implies upside of nearly 35% to Tuesday’s closing price of $2.79.

However, previous trading trends are not indicative of future share price performance and they should not be used as a basis for investment. It should also be noted that broker projections are estimates that may or may not be met and independent advice should be sought before investing in ADA.

Where to invest $1,000 right now

When the experts at Next Investors have a stock pick, it may pay to listen.

The Next Investors have been investing in ASX small cap stocks for years, with their best small cap picks yielding returns of 1,200%, 1,120%, 900% and 678%.

They have just revealed their hand-picked, FY2021 stock portfolio of high conviction long-term investments.

Click the link below to see what they are currently investing in.


S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

Publishers Notice

The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

Australian ASX Small Cap stocks | Why is Australia’s leading small cap publication

Founded seven years ago, is Australia’s leading and longest standing website for investor and finance news, education and expert opinion.

Published by StocksDigital, Finfeed was created to report daily on the comings and goings of ASX listed stocks in the small cap market.

As the first digital publication dedicated specifically to this space, Finfeed soon became the most trusted publication in the market, quickly garnering over two million page views – a number that continues to rise. provides its readers with informative articles that tackle the latest in market moving #ASX small cap news, plus exclusive content you won’t find anywhere else. It is aimed at those with an interest in investing, market education, company performance, start-ups and much more. is the only media organisation operating under the strength of a Financial Services License and is backed by leading journalists and analysts all with brands of their own.

The website aims to inform, educate and entertain with content that drills down into the heart of financial matters.

Finfeed is a leading source of investor and market information, with everything investors need to know about how to invest written in a way that anyone can understand. 

Over the years, the website has expanded beyond exclusively reporting on small caps, to profile Australia’s leading ASX listed small, mid and large caps as well as some of the country’s most successful CEOs and business leaders to find out what makes them tick.

Every day you will find fresh content covering:

Fast Facts

Over 4,000 articles published

Over 2.3 Million Page Views and counting

Over 10,000 followers on social media

Subscriber list growing by 2% monthly

Thanks for subscribing!