Middle East contract win
Avon Rubber (AVON.L) has announced a significant Middle East contract win for 52,000 of its C50 respirators with associated new MILCF50 filters for delivery in the 2014 financial year. This is significant both in terms of de-risking our growth forecasts for P&D in 2014 and being the first example of orders for a project Fusion product in the form of the new filter. We estimate the sales value of the combined order at around $11m, highlighting the lumpy but profitable nature of international orders. Although we are maintaining our FY14 forecasts at this early stage, we believe that given the current uncertain political environment, further orders could well emerge, leading to potential future upgrades.
Middle East order highlights international opportunity
The order from an unnamed Middle Eastern customer for 52,000 C50 respirators and new MILCF50 for delivery in FY14 highlights the ongoing opportunity for Avon in the international military and first responder market. While we have always cautioned that such orders are lumpy in nature and the timing of receipt is difficult to predict, we feel this order is symbolic of the opportunities and, given the current political uncertainty in the region, we would not be surprised if further orders for protective equipment were forthcoming. We feel this highlights Avon’s product leadership position and the benefits of the business development efforts over the past few years.
Project Fusion starting to deliver
Equally important in our view is that Avon is delivering on Project Fusion. The combined order of respirators and the new MILCF50 filters, which we saw being developed in Cadillac on our site visit in February 2013, is the first clear evidence of the support these products will receive in the market. Management has always stated that 2014 would be a pivotal year, when Fusion products will begin to make a meaningful contribution, and today’s order provides good support to that assertion.
Valuation: De-risking growth, future upgrade potential
We estimate that today’s contact could be worth some $11m of revenue. At this stage, a month before the start of the FY14 financial year, we are maintaining our FY14 forecasts, with this order supporting our 2014 P&D growth expectations. With increasing confidence in FY14 forecasts and updating for increased relative peer ratings, we are edging up our FY14 based fair value to 540p/share. Any future orders could provide a catalyst for further upgrades.
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Avon Rubber (AVON.L) has announced a significant Middle East contract win for 52,000 of its C50 respirators with associated new MILCF50 filters for delivery in the 2014 financial year. This is significant both in terms of de-risking our growth forecasts for P&D in 2014 and being the first example of orders for a project Fusion product in the form of the new filter. We estimate the sales value of the combined order at around $11m, highlighting the lumpy but profitable nature of international orders. Although we are maintaining our FY14 forecasts at this early stage, we believe that given the current uncertain political environment, further orders could well emerge, leading to potential future upgrades.
Middle East order highlights international opportunity
The order from an unnamed Middle Eastern customer for 52,000 C50 respirators and new MILCF50 for delivery in FY14 highlights the ongoing opportunity for Avon in the international military and first responder market. While we have always cautioned that such orders are lumpy in nature and the timing of receipt is difficult to predict, we feel this order is symbolic of the opportunities and, given the current political uncertainty in the region, we would not be surprised if further orders for protective equipment were forthcoming. We feel this highlights Avon’s product leadership position and the benefits of the business development efforts over the past few years.
Project Fusion starting to deliver
Equally important in our view is that Avon is delivering on Project Fusion. The combined order of respirators and the new MILCF50 filters, which we saw being developed in Cadillac on our site visit in February 2013, is the first clear evidence of the support these products will receive in the market. Management has always stated that 2014 would be a pivotal year, when Fusion products will begin to make a meaningful contribution, and today’s order provides good support to that assertion.
Valuation: De-risking growth, future upgrade potential
We estimate that today’s contact could be worth some $11m of revenue. At this stage, a month before the start of the FY14 financial year, we are maintaining our FY14 forecasts, with this order supporting our 2014 P&D growth expectations. With increasing confidence in FY14 forecasts and updating for increased relative peer ratings, we are edging up our FY14 based fair value to 540p/share. Any future orders could provide a catalyst for further upgrades.
To Read the Entire Report Please Click on the pdf File Below.