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Technology Stocks : Allen-Vanguard Corp (TSE: VRS, ADR: ALNVF)
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From: Max Fletcher3/11/2008 10:03:40 PM
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Copied from stockhouse:

This comes from Paradigm's March 10 morning notes, very interesting.

The U.S. military has commenced a program of refurbishing and transferring up-armored

Humvees from the U.S. inventory to the government of Iraq. There are currently ~630 vehicles

undergoing a maintenance overhaul and paint job to reflect the colors of the Iraqi security

forces. The goal of the program is to transfer 4,244 vehicles to the Iraqi forces by the end of

2008, and reach more than 8,000 Humvees transferred by the end of 2009. Recall that, at the

end of January, the Naval Sea Systems Command posted a pre-solicitation notice to establish

an ID/IQ contract for the procurement of up to 2,500 Symphony IED countermeasure systems

for a period of 3 years (implying a total of up to 7,500 units over the 3-year period). Given that

the Symphony program is a US-sponsored program funding coalition and indigenous troops,

we believe that this pre-solicitation notice could be the result of this Humvee “refurbish and

transfer” program (which began in mid-January). As such, the procurement of the Symphony

systems could be sped up to meet the pace of the refurbishment program which aims to

transfer a total of 8,000 vehicles over a two-year span. At a market cap of $390m and an EV of

~$565m (based on $175m of debt as of March 31, 2008), the stock is trading at 3.5x

EV/EBITDA and 4.4x non-GAAP earnings. We continue to believe VRS has excellent riskreturn

parameters. We maintain our Buy recommendation and $19.00 target price.
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