Volatus Aerospace Corp. (VOL:TSX; VLTTF:OTCQB) announced two new operational developments: a contract win and a strategic acquisition, reported Echelon Capital Markets analyst Rob Goff in a March 7 research note. Volatus provides integrated drone solutions throughout North America and is expanding into Latin America and beyond.
Compelling Gains for Investors
Echelon has a Speculative Buy rating and a CA$0.90 per share target price on Volatus, currently trading at about CA$0.40 per share. The price difference reflects a compelling potential return for investors of about 125%.
Agreement Valued at CA$5M
Through a competitive request for proposal process, Volatus, through its subsidiary, Canadian Air National Inc., landed a CA$5 million (CA$5M) master service agreement with a pipeline operator to provide "pipeline right-of-way surveillance and environmental monitoring" in Ontario, likely starting this month, Goff reported. Using unmanned aerial vehicles, Volatus will monitor, prevent and mitigate pipeline leaks or environmental hazards.
"The company indicated within its guidance that it has an opportunity pipeline of CA$110M in potential business," Goff added. Given the pipeline's value, "Volatus could outperform its guidance."
The agreement should generate CA$5M over three years and in 2023, potentially reach CA$750,000. Further, the margin on this agreement should be 35–40%, as estimated by Echelon.
"The contract has the potential for significant expansion while it serves as a reference win for additional contracts," wrote Goff. "We could see annualized recurring or drones as a service (DaaS) revenues exceeding CA$10M."
The opportunity exists for Volatus to grow this line of business given Canada is home to about 840,000 kilometers of pipeline through which liquids like natural gas are transported. The potential market is valued at CA$200M at least, Goff pointed out.
Purchase of Company
In other news, the analyst reported, Ontario, Canada-based Volatus just agreed to acquire Sky Scape Industries for a total price of CA$845,000 (an initial CA$422,500 payment and a subsequent CA$422,500 earnout payment).
Sky Scape obtains and provides data via manned and unmanned drones and using remote sensing techniques. For example, it conducts inspections of utilities and oil and gas facilities. Operating in 24 U.S. states, the New Jersey-based company has several multiyear contracts with clients the likes of First Energy.
"The acquisition of Sky Scape Industries is consistent with Volatus' strategy to build out its long line inspection and monitoring where currently the market is typically served through piloted aircraft," Goff wrote.
The analyst added that Volatus plans to integrate Sky Scape's internal pilot network into its existing ConnexiCore drone pilot network "to expand its sales efforts and drive growth."
What To Watch For
The commercial drone and drone technology company is expected to make additional strategic acquisitions, which could move its stock, wrote Goff. Other possible near-term catalysts are Volatus landing additional contracts and making further sales of fleet craft.
"The company indicated within its guidance that it has an opportunity pipeline of CA$110M in potential business," Goff added. Given the pipeline's value, "Volatus could outperform its guidance."
| Want to be the first to know about interesting Technology investment ideas? Sign up to receive the FREE Streetwise Reports' newsletter. | Subscribe |
Disclosures:
1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. They members of their household own securities of the following companies mentioned in the article: None. They or members of their household are paid by the following companies mentioned in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with: Volatus Aerospace Corp. Please click here for more information.
3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. 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., a company mentioned in this article.
Disclosures for Echelon Capital Markets, Volatus Aerospace Corp., March 7, 2023
U.S. Disclosures: This research report was prepared by Echelon Wealth Partners Inc., a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. This report does not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. Echelon Wealth Partners Inc. is not registered as a broker-dealer in the United States and is not be subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. Any resulting transactions should be effected through a U.S. broker-dealer.
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.
Important Information and Legal Disclaimers: Echelon Wealth Partners Inc. is a member of IIROC and CIPF. The documents on this website have been prepared for the viewer only as an example of strategy consistent with our recommendations; it is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular investing strategy. Any opinions or recommendations expressed herein do not necessarily reflect those of Echelon Wealth Partners Inc. Echelon Wealth Partners Inc. cannot accept any trading instructions via e-mail as the timely receipt of e-mail messages, or their integrity over the Internet, cannot be guaranteed. Dividend yields change as stock prices change, and companies may change or cancel dividend payments in the future. All securities involve varying amounts of risk, and their values will fluctuate, and the fluctuation of foreign currency exchange rates will also impact your investment returns if measured in Canadian Dollars. Past performance does not guarantee future returns, investments may increase or decrease in value and you may lose money. Data from various sources were used in the preparation of these documents; the information is believed but in no way warranted to be reliable, accurate and appropriate. Echelon Wealth Partners Inc. employees may buy and sell shares of the companies that are recommended for their own accounts and for the accounts of other clients.
Echelon Wealth Partners compensates its Research Analysts from a variety of sources. The Research Department is a cost centre and is funded by the business activities of Echelon Wealth Partners including, Institutional Equity Sales and Trading, Retail Sales and Corporate and Investment Banking.
