closed contracts valuing about AU$50 million (AU$50M) total, most recently one for AU$33M with the U.S. government, since raising capital in March, reported Peloton Capital analyst Darren Odell in a July 19 research note.
"We believe this recent contract wins cement DroneShield's position as one of the key players in the global market for counterdrone solutions," Odell wrote.
Together, the contracts the company landed in the last four months equate to an estimated cash profit in 2023 of about AU$22.5M, noted Odell, given the expected cash flow of about AU$70M.
Odell noted that Peloton has a target price of AU$0.84 per share on this Australian anti-drone equipment and services firm "based on increased confidence on the closure of larger contracts in full-year 2023 (FY23) and beyond."
In comparison, DroneShield is trading at about AU$0.305 per share, noted Odell. This price gap implies a significant possible gain for investors of 179%.
The defense solutions company remains a Buy.
More Contracts Anticipated
Odell pointed out that DroneShield's repeat contracts with the U.S. government have increased in value over a two- to three-year span. The first one was AU$1M. The next was AU$11M, and the latest was AU$33M.
"We would expect this trend to remain for the U.S. and Five Eyes countries (including the North Atlantic Treaty Organization)," purported Odell. "The war in Ukraine has ensured elevated interest in the capabilities of the likes of DroneShield, which is not expected to dissipate any time soon."
Revenue Growth Continues
Given its performance thus far in 2023, highlighted Odell, DroneShield is on track to achieve AU$100M in revenue with a 60%-plus gross margin.
Year to date, the company already surpassed Peloton's 2023 revenue estimates. Looking ahead, the growth expected to come from existing customers' repeat orders "provides confidence in our FY24 forecasts," wrote Odell.
Additionally, DroneShield has a sales pipeline of various AU$10M-plus contracts and a total sales pipeline with a value of about AU$200M.
At the end of this year, Odell wrote, the company is expected to have a cash balance of about AU$60M.
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- As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of DroneShield Ltd.
- Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
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Disclosures for Peloton Capital, DroneShield Ltd., July 19, 2023
This report is provided by Peloton Capital Pty Ltd (Peloton) (ABN 22 149 540 018, AFSL 406040) and is general in nature. It is intended solely for the use of wholesale clients, within the meaning of the Australian Corporations Act 2001. This report must not be copied or reproduced, or distributed to any person, unless otherwise expressly agreed by Peloton. This document contains only general securities information or general financial product advice. The information contained in this report has been obtained from sources that were accurate at the time of issue, including the company’s ASX releases which have been relied upon for factual accuracy.
The information has not been independently verified. Peloton does not warrant the accuracy or reliability of the information in this report. The report is current as of the date it has been published. In preparing the report, Peloton did not take into account the specific investment objectives, financial situation or particular needs of any specific recipient. The report is published only for informational purposes and is not intended to be personal financial product advice. This report is not a solicitation or an offer to buy or sell any financial product.
Peloton is not aware whether a recipient intends to rely on this report and is not aware of how it will be used by the recipient. Before acting on this general financial product advice, you should consider the appropriateness of the advice having regard to your personal situation, investment objectives or needs. Recipients should not regard the report as a substitute for the exercise of their own judgment. Peloton may assign ratings as ‘speculative buy’, ‘buy’ and ‘sell’ to securities from time to time. Securities not assigned are deemed to be ‘neutral’. Being assigned a ‘speculative buy’, ‘buy’ or ‘sell’ is determined by a security total return potential, with the total return potential being aligned to the upside or downside differential between the current share price and the targeted price within a specified time horizon, if deemed appropriate. The views expressed in this report are those of the analyst/author named on the cover page. No part of the compensation of the analyst is directly related to inclusion of specific recommendations or views in this report.
The analyst/author receives compensation partly based on Peloton revenues as well as performance measures such as accuracy and efficacy of both recommendations and research reports. Peloton believes that the information contained in this document is correct and that any estimates, opinions, conclusions or recommendations are reasonably held or made at the time of its compilation in an honest and fair manner that is not compromised. However, no representation is made as to the accuracy, completeness or reliability of any estimates, opinions, conclusions or recommendations (which may change without notice) or other information contained in this report. To the maximum extent permitted by law, Peloton disclaims all liability and responsibility for any direct or indirect loss that may be suffered by any recipient through relying on anything contained in or omitted from this report. Peloton is under no obligation to update or keep current the information contained in this report and has no obligation to tell you when opinions or information in this report change. Peloton does and seeks to do business with companies covered in research. As a result, investors should be aware that the firm may have a conflict of interest which it seeks to manage and disclose. Peloton and its directors, officers and employees or clients may have or had interests in the financial products referred to in this report and may make purchases or sales in those the financial products as principal or agent at any time and may affect transactions which may not be consistent with the opinions, conclusions or recommendations set out in this report.
Peloton and its Associates may earn brokerage, fees or other benefits from financial products referred to in this report. Furthermore, Peloton may have or have had a relationship with or may provide or has provided, capital markets and/or other financial services to the relevant issuer or holder of those financial products.
Specific Disclosure: Peloton Capital raised $40.3m for DroneShield (DRO), announced March 2023, for which it earned fees.
Specific Disclosure: The analyst does hold securities in DRO.
Specific Disclosure: The report has been reviewed by DRO for factual accuracy.
Specific Disclosure: As at 18 th July, Peloton Capital held c.1m DRO shares and 15m call options. This position may change at any time and without notice, including on the day that this report has been released. Peloton and its employees may from time-to-time own shares in DRO and trade them in ways different from those discussed in research. Peloton Capital may arrange the buying and selling securities on behalf of clients.