TOP IDEAS - Avante Logixx Inc.'s (TSXV: XX) renewed focus in the high-level security market delivers recurring revenues and profits to reinvest and grow; a good combination for small cap investors.

About 3-years ago Avante Logixx Inc.'s (TSXV: XX - $0.22) management was at a crossroads: Continue to invest in the development of new security technology which consumed a significant amount cash and had little in sales commitments or try to turn around the financial performance of the Company by renewing its focus in servicing the security market, which had stable revenues but, with the appropriate management attention and resources, could grow profitably. Fortunately for Avante shareholders, they picked the path to profitability.

Avante Logixx is not your run-of-mill security alarm company. Based in Toronto, Ontario, the brand Avante Security (a wholly owned subsidiary) is a provider of best-in-class residential and commercial security services. By best-in-class, it means high-level and full-service security for the protection of property and, more importantly, to protect people, most often VIPs (CEO's and celebrities) and their families. Avante is known for deploying some of the most sophisticated intrusion detection, intelligent video analytics and access control technology in the market today to create a perimeter bubble around homes and businesses that require high-level security and monitoring. 

Avante is an industry leader in rapid response. Its mobile security response teams can arrive on the scene within six minutes or less on average for an intrusion or safety breech alert. Its mobile security operatives provide around-the-clock secure transport services for individuals and corporation executives.

The Company also provides security services plans for travelling abroad. Avante's International Security Travel Advisory Services (ISTAS) are used by multinational companies to ensure that their travelling employees have appropriate protection, secure transportation services and logistics while travelling to higher risk environments.

Avante has demonstrated significant revenue growth across all its security service offerings which had translated into meaningful profit growth. Most recently in Q1 of fiscal 2014, the Company reported quarterly revenues spiked up to $2.33 million, earning an adjusted EBITDA of $440 thousand. Gross margins reached 40%.

Avante has posted four consecutive quarters of net income. During this period revenues have jumped 33% to $7.6 million.

A big portion of Avante's sales are earned from high-margin recurring monitoring and response fees associated with the 24/7 high-level security protection it provides. Last quarter year-over-year Avante's recurring revenue base grew 13% and accounted for approximately a third of the Company's revenues.

The recent growth spurt has boosted Avante's balance sheet. As of June 30, 2013 the Company held over $1 million in cash and carried no debt. 

The growth and the recurring revenue base is attractive, but, so still is the valuation of Avante's shares, trading a little over 6x EV/EBITDA if you annualize last quarter results. Over the next 12 months, on earnings per share (EPS) basis we feel the Company can return $0.03-$0.04. From this we advise small cap value investors to accumulate Avante shares up to a price of $0.40 from the current trading level of $0.22. Given the Company's recent growth profile our accumulation price target may be conservative and beyond 12 months Avante shares may be able to support a much higher share price. 

Avante has approximately 55.9 million shares outstanding. Management and directors own about 49% of the Company's stock. 

Avante Logixx website: www.avantesecurity.com

Author Ownership Disclosure: TSXV: XX - Yes