landed its first contract with a large, unnamed, U.S.-based energy company for CA$4M, and is to commence related operations next month, reported Echelon Capital Markets analyst Rob Goff in a September 11 research note.
"We view this contract positively where it signifies the company's strategic move into a larger market, building on its expertise and capabilities in the oil and gas industry," Goff wrote.
He explained that energy companies and oil and gas pipeline users employ drones to monitor their infrastructure for safety and regulatory compliance.
Potential 241% Gain
Based on the news, Echelon reiterated its Speculative Buy rating and CA$0.75 per share target price on the Canadian provider of unmanned area vehicle solutions, noted Goff. Volatus' current share price, in comparison, is CA$0.22 per share.
The difference between the current and target prices reflects a substantial return for investors of 241%.
Benefits of Contract
The new contract should help Volatus grow to CA$4M in annualized revenue and surpass a 10% EBITDA margin, according to management, Goff reported.
Landing this work should also help the company develop a "track record that favors it in future contract pursuits, either through a request for proposal (RFP) or direct," added the analyst.
Large U.S. Market
Goff highlighted the scope of the oil and gas pipeline industry in the U.S., and, thus growth potential for Volatus. The network in the States encompasses about 4.2 million kilometers of pipeline, five times the size of Canada's.
Further, the industry in the U.S. is estimated to reach US$1.1 billion in value over the next ten years.
Pursuing Similar Contracts
Volatus has been vying for contracts for long-line inspection work through the RFP process. The duration of long-line inspection contracts is typically three to five years, and the likelihood of renewal is high.
"The recurring nature of the business warrants a premium against equipment sales," Goff wrote.
This year alone, Volatus management expects to generate CA$12−14M in revenue from long-line inspection.
The company is well-situated versus competitors given its two significant advantages, Goff noted. They are its proprietary Aerial Information Reporting System technology and its partnerships with artificial intelligence and advanced sensor companies. Given its technological capacity, Volatus compiles inspection data for clients in a database. As such, it can and does inform them of any changes in the numbers over time.
Also, the company can offer and provide clients with drone technology to replace manned aircraft, a prospect with fewer financial and environmental impacts.
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- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Volatus Aerospace Corp.
- Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
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Disclosures For Echelon Wealth Partners, Volatus Aerospace Corp., September 11, 2023
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ANALYST CERTIFICATION Company: Volatus Aerospace Corp.| VOL-TSX I, Rob Goff, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that I have not, am not, and will not receive, directly or indirectly, compensation in exchange for expressing the specific recommendations or views in this report.
During the last 12 months, Echelon Wealth Partners Inc. provided financial advice to and/or, either on its own or as a syndicate member, participated in a public offering, or private placement of securities of this issuer.
During the last 12 months, Echelon Wealth Partners Inc. received compensation for having provided investment banking or related services to this Issuer.