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AAC Clyde Space: Improving despite COVID constraints - Edison

Improved performance despite COVID

Despite the impact of the pandemic, Q220 again delivered year-on-year improvements in revenues and at all earnings levels. Net sales grew by 34% to SEK42.4m for H120 and EBITDA losses reduced by 27% to SEK8.7m (H119: SEK14.2m). While internal operational performance during lockdown was robust, aided by mitigation measures, COVID-19 did lead to some supply chain disruption and customer order deferrals in the period, but nevertheless the performance remained encouraging. While the order backlog fell 10% to SEK164m (Q120: SEK182m), this was largely due to a stronger SEK, and before the recent SEK17m collaborative project with Saab and ORBCOMM.

Potential challenges for 2021

H220 activity levels appear encouraging given three anticipated platform deployments and ongoing work on five other satellites. However, delays to some new customer orders and project milestones caused by late receipt of subsystems and components from suppliers lead us to reduce our net sales assumptions for FY20 by 12% to SEK114m and increase the EBITDA loss to SEK5.0m. Although supported by the healthy H120 order backlog, management notes the challenges to achieving positive EBITDA in FY21 if current conditions persist. Much will depend on the timing of anticipated new projects. We have reduced our FY21 net sales estimates by 24% to SEK147.6m and deferred the achievement of positive EBITDA to FY22.

Valuation: Still in early growth phase

The company recently announced that its shares can now be traded on the OTCQX market in the US, providing more direct access for US investors, as one of AAC Clyde Space’s strategic goals is to increase its operational US presence. Our capped DCF, using zero terminal growth and a calculated WACC of just under 12%, currently returns a value of SEK6.0 per share on our reduced estimates.
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