"Form is temporary, class is permanent" is an expression typically associated with the higher echelons of sport. Yet equally, it also applies to equities - especially where a business has delivered superior returns over an extended period.
None more so than Avingtrans (AVG) , a specialist engineer servicing the nuclear, oil & gas, defence, industrial, and medical device sectors.
Here under the astute leadership of CEO Steve McQuillan and CFO Stephen King, the stock has grown more than 1,000% to since 2010 vs. 48% for the FTSE All share.
Today, the company said that results for the 6 months ending Nov'23 were in line with FY24 estimates. Singer Capital Markets projects £137m sales, £10m EBITDA and 2.8p EPS, with a BUY rating and a 510p price target.
Not surprising, given AVG has excellent forward visibility supported by a backlog covering >90% of its targeted FY24 revenues after securing several blue-ribbon orders like the $10m demonstration facility contract at Bill Gates’ new TerraPower site in Wyoming, US.
Elsewhere, in order to further streamline operations, the Board has decided to roll both (previously separate) engineering divisions into one - called Advanced Engineering Systems and headed up by Austen Adams.
But that's only half the story.
Expansion capital continues at pace within its exciting medical devices division - with a 75% stake in Magnetica Limited and 100% in Adaptix Ltd - seeking to capitalise on the largely untapped multi $bn market for small-form MRIs and X-ray machines, offering crisp 3D, orthopaedic, and veterinary based scans at the 'point of care' (e.g. in doctor's surgeries).
Sure there’s plenty to do. Yet equally, this IPR-rich technology appears to be state-of-the-art after Adaptix Ltd received FDA approval in Dec'22 with first sales already secured; and providing a blueprint for Magnetica Limited, which is pursuing a similar commercialisation strategy and is hoping to launch in America too sometime in 2024, subject to regulatory clearance.
Ok, so how much might this healthcare arm (hypothetically) be worth, assuming everything goes to plan?
Well given its growth trajectory and attractive unit economics, I would guess that it could be ultimately valued at over £150m, which combined with AVG's more traditional engineering side would hypothetically deliver a SOTP valuation of >£9/share for the group.
CEO Steve McQuillan commenting: "H1’24 trading was in line and, we are comfortable in achieving market expectations for FY24. Additionally, we are pleased to announce the formation of the new Advanced Engineering Systems division by combining the mature engineering businesses - which contrasts with the investment requirements of the nascent Medical and Industrial Imaging division. We will comment further on this in our H1'24 results on 28th Feb."
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