Future production facilities will be set up in various regions around the world, with the Richmond facility acting as the Master template.
Their current production facility in British Columbia is highly automated and cost-competitive against Asian or other geographic regions, enables the protection of Avigilon’s intellectual property, and is large enough to handle annual sales of $500 million by Q4 2016 (without any further Capex) which is roughly double the current production run-rate of $220 million. As such, Avigilon gains immeasurably from his prior experience running a large technology company that engaged in a somewhat similar product set as Avigilon. Alexander Fernandes, has over 20 years of experience in the technology sector, and in fact founded QImaging and then sold it in 2002. The company went public in late 2011 and has done several re-financings and is thus very well capitalized for its current and future expansion plans, even after paying all-cash for several recent modestly-priced bolt-on acquisitions. It would be reasonable to expect that in the coming decade or two almost the entire analog market sector will be eliminated in favor of digital, IP-enabled, systems. Furthermore, and most importantly regarding future growth opportunities, the worldwide market for such systems (both digital and analog, not including installation costs), was $12.6 billion in 2012 and IHS forecasts it will grow to $23.2 billion in 2017, with the High Definition digital component making up the lions-share of the growth (24% CAGR), whereas demand for outmoded analog systems will remain basically flat. It is a “Moat in the making” and should also qualify it for “Rule-Breaker” status given the unifying, one-stop-shopping nature of its value proposition in the marketplace, and its steady displacement of outmoded analog competition. This gives them a strong competitive advantage relative to the alternatives. Avigilon provides the only end-to-end solution for buyers of High Definition digital surveillance cameras, storage solutions, network switches, video analysis/alerts, and access control. It has rapidly grown sales (102% CAGR), and a current $220 million Canadian run-rate, steadily expanding profit margins (unusual for a growing company, especially in the tech sector), competes in a highly fractured international market (where no participant had more than a 5.9% market share, and the top 15 had only a 43.5% share). Avignon has been the #1 growth company in Canada the past 2 years: Avigilon, ticker symbol AVO on the Toronto Exchange, and AIOCF in the US. I’m sorry but I don’t know where it’s from, but it was somewhere on MF (I think).
I first learned about Avigilon from the following post or article in the spring of 2014. This is a long post, but if you are interested I'd suggest reading it all. Be aware that as a Canadian stock this is not as liquid as most others that I’m in. However, it seems to me that this will obviously be good for their actual business, as their products will be cheaper in US dollars, or if they anchor their prices in US dollars their profits will be much larger. This has reduced the value of its earnings, which are given in Canadian dollars.
Its price in US dollars has been severely hurt by the dollar’s rise against the Canadian dollar (the dollar has risen against just about everything else as well, by the way). Avigilon is my sixth largest position at present, at about 7%, and approximately the same size as my positions in WAB, CRTO, and XPO, which I have already discussed.