Avanceon and Octopus Digital – outlook

The management team of Avanceon Limited and Octopus Digital Limited conducted a webinar today, where they shed light on CY21 financials and outlook.

To note, AVN posted PAT of PKR 1.6Bn (EPS: PKR 4.9) as compared to PKR 1.0Bn (EPS: 3.2) in the SPLY (↑53.6% YoY). The result was accompanied with a final dividend of PKR 1.0/sh along with a 25% bonus issue. On the other hand, OCTOPUS posted a PAT of PKR 346Mn (EPS: 2.5) as compared to PKR 220Mn (EPS: 1.6) in the SPLY (↑57.3% YoY).

Key highlights of the session are discussed below:

The management highlighted that Avanceon Group of Companies has an order backlog of USD 45Mn as at 1st Jan’22 as the company uses a conservative revenue recognition policy in line with IFRS-15, opting for cost of completion method.

In CY22, the management is targeting revenues of USD 5.0Mn which are expected to grow to USD 37Mn by the end of CY27. In order to achieve this growth, the company has developed an extensive sales strategy which specifically focuses on Systems Integration (onboarding process completed and fully geared to achieve subscription target), Reseller Model (distribution network signed with EU and ME markets) and OEMs (ongoing discussions with key OEMs in place).

The company has also emphasized on increasing marketing budget through extensive focus on digital platform revamp, market research reports and digital business development.

As for AVN, the management expects its main revenue drivers to be Qatar (USD 27.8Mn) followed by Pakistan (USD 15.9Mn) and UAE (USD 10.5Mn) in CY22. The company has also set its sight on ‘Road to 100’ to achieve revenues of USD 100Mn by FY24.

As per the management, core business of the company is expected to grow by 10-15% YoY through retail service business, EPC projects and building technologies. Additional growth is expected from large scale projects, Digital sales, and Business Development projects.

The company has also ventured into Process Business where new units have already been set up. The management is bullish on the future prospects of this segment and expects it to fetch revenues of up to USD 20Mn in 4 years. The main focus of the management will be on building a formidable team and aligning the right channel partners in order to grow across all existing geographies and leverage current footprint.

Currently, the company has 16 active opportunities in its Process Business setup which have a cumulative value of USD 5.0Mn with presence in Kazakhstan and Nigeria.

Going forward, the management stated that several strategic initiatives have been taken in order to improve efficiency and ensure smooth operations towards their longer term goals. These include; i) revamp of digital arm to evolve from seamless integration to a seamless solution delivering organization, ii) formation of executive board to oversee enterprise expense & capital budgeting and iii) introduction of Objectives and Key Results (OKRs) to improve employee performance.

Courtesy – BMA Capital Management Ltd.

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