The management of Avanceon Limited (AVN) held a corporate briefing session on 10th Nov’22 to discuss the company’s financial performance and future outlook.

Brief Takeaways

• To recall, the company posted a profit after tax of PKR 1,732mn in 9MCY22 compared to PKR 572mn in 9MCY21, up by 3x YoY given higher exchange gain.
• As of 30th Sep’22, the company has a backlog of USD 71mn. The company is targeting to achieve order generation of up to USD 100mn by the end of CY25. From the total target, the company projects to receive USD 20mn from Pakistan, USD 40mn from Qatar and Saudi Arabia, and USD 40mn from UAE and North Africa by CY25.
• The management clarified that most of the revenues from backlog are realized in last two quarters of the calendar year.
• The management informed that around 80% of the company’s revenue is in terms of USD. Meanwhile, about 40% of the cost is USD based, while the remaining is in terms of PKR.
• The management stated that the company in the upcoming two-three years will be focusing only on EmpiriAI and Octopus Digital Limited (OCTOPUS).

Local Business:

• Regarding business in Pakistan, the company seeks to organically expand its core operations by 10-15% YoY. In this regard, the company will be focusing on retail service business, EPC projects, and building technologies expansion.
• Furthermore, an additional growth strategy will be in place to maximize the company’s order generation.
• By 2025, the management expects to have a backlog of USD 22.54mn from local operations.

UAE & African business:

• In three to four years, the company’s core business in UAE is expected to jump up by 23-25% YoY.
• The company seeks to geographically diversify in Africa. For this purpose, the company will sign JV agreements in African countries such as Nigeria and Egypt.
• According to the management, the company will witness an extra boost from process packages, WHCP, and Solar projects.
• According to the management, the process packaging in particular is expected to recognize a hefty revenue by 2024.
• The company expects a backlog of USD 40.15mn by CY25 from UAE & African regions.

Qatar & Saudi Arabia business:

• In Qatar, the company plans to participate in a tender bidding round for infrastructure and waters post-FIFA World Cup’22.
• Moreover, the company will form a project-based EPC JV to bid for high-value oil and gas projects.
• In Saudi Arabia, the company will be searching for brownfield EPC partners for oil and gas, water, and other large-scale infrastructure projects.
• The management told that the company will promote and set up proven solutions in Qatar and Saudi Arabia. For this purpose, cloud-based supervisory control and data acquisition will be used.
• The company will set up a sales resource in Kuwait. Moreover, a standalone business in Kuwait will be developed which will export using Qatar Free Zone.
• In CY25, the company anticipates order generation of USD 21.79mn from Qatar, USD 15.81mn from Saudi Arabia, and USD 4mn from Kuwait/Iraq.

Process Business Unit:

• The company plans to develop a new Process Business Unit, which as per management’s estimates will have a backlog of USD 20mn in a time span of four years.
• The company aims to line up with the right channel partners.

Octopus Digital Limited:

• The management forecasts that revenue of OCTOPUS will climb up to USD 37.3mn by CY27 from an estimated USD 5.8mn in CY22.
• As per management, After Market Services and Digital businesses are expected to contribute USD 13mn and USD 24mn, respectively towards the end of CY27.

Acquisition of EmpiricAI

• Avanceon Limited has acquired EmpiricAI, which is an analytics solution provider which helps companies improve efficiency and productivity.
• Avanceon Limited and Dawood Hercules Corporation Limited entered into a Share Swap Agreement.
• The newly acquired business will help the company receive realistic, quantifiable, and relevant data.

Partnership with ZOMCO

• The company has also entered into a partnership with ZOMCO in Saudi Arabia to fulfill banking facilities such as the issuance of bid bonds, performance, retention bonds, and insurance.
• The partnership will enable the company to qualify for projects of Saudi Aramco.
• The partnership will provide legal documentation, administration, and logistical support.

Courtesy – AHL Research