Counterdrone Co. Added To Stock Market Index

DroneShield Ltd. (DRO:ASX; DRSHF:OTC) just garnered recognition in two ways; it was added to the S&P/ASX All Ordinaries Index and, separately, it was given a 2023 HIRE Vets Medallion Award.

Inclusion in the index, announced by the S&P Dow Jones Indices on March 1, will go into effect prior to trading on March 18, as noted in a news release.

DroneShield's Chief Executive Officer Oleg Vornik commented in the release, "This most recent news of addition into the All Ordinaries Index, as our market capitalization and daily liquidity continues to rapidly rise, is expected to further highlight our story to a number of institutional and retail shareholders, adding to the existing base of over 11,000 existing investors in DroneShield."

As for the HIRE Vets award, this is the second year in a row the company received this honor. The awards, a federal program, are bestowed upon employers that recruit, hire, and retain veterans, another news release explained.

Positive 2024 Corporate Outlook

DroneShield provides artificial intelligence-powered hardware and software solutions to "detect, identify and defeat aerial, ground and maritime threats," Bell Potter Analyst Daniel Laing described in a March 4 research report. "The company's products are largely in-house technology and include handheld, vehicular, and fixed installations."

Customers are military, government agencies, law enforcement agencies, critical infrastructure, and commercial entities globally. With locations in Australia and the U.S., DroneShield is optimally located, particularly when it comes to supplying Western allies.

According to DroneShield, it is the world's publicly listed counterdrone (C-UAS) pure play.

The growing company recently reached a major milestone in that it turned profitable, Laing wrote. It achieved AU$9.3 million (AU$9.3M) of post-tax profit in 2023, resulting from record performance.

Operationally, last year, DroneShield landed four more contracts, including one with the U.S. government and one with the Australian government. It expanded its workforce and relocated to a larger facility in Sydney.

"DroneShield has had an outstanding last 12 months," Laing added.

For 2024, the company is well-positioned. It has a contracted backlog valued at AU$30M and a total sales pipeline valued at AU$510M. It is debt-free and, as of year-end 2023, had AU$57.9M in cash.

External factors benefitting DroneShield include ongoing geopolitical conflicts, the related growth of drone use, and the increasing spending on counterdrone technology, defense, and security, the company said.

"With the company's strong financial position, detailed sales pipeline, and the current macro environment, we are confident the company will continue to grow its earnings in 2024," Laing wrote.

700% Market Expansion Projected

The global counterdrone market is forecasted to expand at a compound annual growth rate of 26% between this year and 2032. It is estimated the market will hit US$15.3 billion (US$15.3B) by that year, a 700% increase from US$1.9B in 2023, according to a Global Market Insights report.

Key growth drivers, according to the report, are expected to be advancements in drone technology along with increases in three areas: geopolitical security concerns, unauthorized drone activities, and government spending on defense and aerospace.

The Catalyst: More Revenue Growth

DroneShield's goal for the 2024 to 2028 period is to reach AU$300–500M in annual revenue, half coming from software-as-a-service offerings and software research and development, the company noted in its Investor Presentation.

Analysts Like the Stock

Laing, in his latest research note, highlighted the key points of the investment thesis on DroneShield. They are its valuation, its solid revenue momentum, the structural growth in the counterdrone market, and the opportunity for the company to expand into adjacent markets, the lucrative field of electronic warfare, for example.

Technical Analyst Clive Maund asserted in a February 3 report that he remains bullish on the counterdrone solutions provider. For one, demand for its products for use in military and nonmilitary applications is rapidly increasing. Its technologies are "remarkable and afford the ability to detect approaching drones a long way off before they are visible." Also, he purported that DroneShield is a prime takeout target for a large defense contractor.

From a stock movement point of view, Maund wrote the recent spike to all-time highs "clearly has long-term bullish implications and should mark the start of a long growth phase for the company and its stock."

Finally, he recommended people in the stock stay long, and those wanting to buy should do so when, and if, the price drops back down to the high AU$0.40s to low AU$0.50s.

The positive aspects of the Buy-rated company, its burgeoning sector, and the conducive macroenvironment in combination make DroneShield a compelling investment, according to the analysts.

Ownership and Share Structure

The company reports a cash balance of AU$58.9 million and a buffer of AU$400 million in its sales pipeline, as well as an order backlog of AU$30 million.

Management and insiders own 11% of the company. CEO Oleg Vornik owns 2.23% of the company with 15 million options. Non-Executive Chairman Peter James owns 0.58% of the company with 920k shares and 3 million options, and Non-Executive Director Jethro Marks owns 0.22%, with 1.5 million options, according to DroneShield.

The company reports that the largest independent investor, Charles Goode, owns 4.41% of the company with 21.5 million shares, while strategic investors own a total of 13.99% of the company.

Eprius Inc. is the second largest shareholder, with 3.16% of the company having 18.5 million shares.

In its February 2023 placement, Droneshield said that it brought ten new institutional investors on board, but it has not yet released more details.

The company reports that there are 612,153,611 million shares outstanding, while free float traded shares make up 83.51% of traded shares, and the company has a market cap of around AU$450 million.

Important Disclosures:

1. 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.
2. Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
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