Elbit Systems Ltd (ESLT): AeroVironment Soars 41% on First Day...

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Re: DewDiligence post# 354

Tuesday, 01/23/2007 7:47:38 PM

Tuesday, January 23, 2007 7:47:38 PM

AeroVironment Soars 41% on First Day

http://biz.yahoo.com/rb/070123/aerovironment_ipo.html?.v=1

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Tuesday January 23, 2:36 pm ET

NEW YORK (Reuters) - Shares of AeroVironment Inc. (NASDAQ: AVAV ) on Tuesday soared as much as 54 percent in their U.S. market debut, boosted by prospects for its small unmanned aircraft, despite competition with larger firms, analysts said.

Shares of the company opened 47 percent higher at $25 and rose to $26.22 before retreating to $23.90, up 40.6 percent, in afternoon trading on the Nasdaq.

The Monrovia, California-based company has developed a series of remotely operated aircraft which can be launched by a single person and provide video images for intelligence, surveillance and reconnaissance.

Customers include the U.S. Army, Marine Corps and Special Operations Command. As of October 28, 2006, AeroVironment had a funded backlog of $69.5 million and an estimated unfunded backlog of $491.5 million, according to documents filed with the U.S. Securities and Exchange Commission.

Alongside a call for more troops by President Bush, the company also benefited from a thin calendar of scheduled initial public offerings, said Sal Morreale, who tracks IPOs for Cantor Fitzgerald in Los Angeles.

"This was the first good deal coming out in a fairly good (broader) market," Morreale said.

Only three companies have priced IPOs this year, raising $395 million, during a traditionally slow period for new issuance.

COMPETITION FROM LARGER FIRMS

The $25 opening price valued AeroVironment at about $454 million. The company also trades at 27 times revenue annualized from the six-month period prior to October 28, 2006, said Scott Sweet, managing director for IPO research firm IPOboutique.com.

The multiple is expensive compared with larger defense contractors, such as Israel's Elbit Systems Ltd. (Tel Aviv: ESLT.TA; NASDAQ: ESLT ) and Lockheed Martin Corp. (NYSE: LMT ), which also develop unmanned aircraft. Elbit and Lockheed Martin trade at 20 times and 17 times 2006 revenue.

But AeroVironment's planes, which can be carried by a single soldier, are smaller and serve a specific military need. Continued use of the planes could also spur growth into international markets, Sweet said.

"Their engineering and battlefield success should open up a whole new avenue for sales through allied nations," Sweet said.

AeroVironment also sells a rapid recharge system for electric industrial vehicles, such as forklifts and airport ground support equipment. Customers for the PosiCharge products include Ford Motor Co. (NYSE: F), Sysco Corp. (NYSE: SYY ), Southwest Airlines Co. (NYSE: LUV) and IKEA, the world's largest furniture retailer.

On Monday, the 6.7 million-share initial public offering raised $113.9 million after pricing at $17 apiece, compared with a $14 to $16 forecast. AeroVironment offered about 4.5 million shares, while selling stockholders offered about 2.2 million shares, according to a filing with the U.S. Securities and Exchange Commission.

The company plans to use net proceeds from the offering, which represents a 37 percent stake in the company, for working capital and general corporate purposes, including research and development of new products, sales and marketing, acquisitions and other capital expenditures.

Led by Goldman Sachs & Co., underwriters have the option to purchase an additional 1 million shares to cover overallotments, according to the SEC filing.
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