DroneShield Ltd. (DRO:ASX; DRSHF:OTC) closed two big contracts and is expected to land more this fiscal year, reported analyst Darren Odell in a Feb. 13 research note. As such, his firm Peloton Capital raised its target price and maintained its Buy rating on this Top Pick.
"We have increased our DroneShield valuation to AU$1 (from AU$0.30) based on increased confidence on the closure [of] larger contracts in 2023 and beyond," Odell wrote. "DroneShield has undertaken material groundwork over the last four years and has finally reached its tipping point."
Because the current share price of this Australian defense company, AU$0.31, is much lower than the target, the potential return for investors is significant.
Odell presented the reasons behind the target price jump.
Momentum Landing Contracts
The counterdrone products and solutions company just closed two contracts for AU$22 million (AU$22M) and has a sales pipeline of about AU$200M, comprised of multiple roughly AU$10M contracts, Odell relayed.
"With its footprint in Five Eyes countries, it is reasonable to assume that certain existing contracted customers are likely to grow their DroneShield product base in time," Odell added.
Further, Peloton expects DroneShield to seal three larger and several smaller deals, potentially more, this year alone.
"With its footprint in Five Eyes countries, it is reasonable to assume that certain existing contracted customers are likely to grow their DroneShield product base in time," Odell added.
Other existing factors should help bolster sales, the analyst pointed out. One is the recent evaluation and likely recommendation of DroneShield by the U.S. Department of Defense's Joint Counter-Small Unmanned Aircraft Systems Office.
Another contributor is the Russia-Ukraine war potentially having "ensured elevated interest in the capabilities of the likes of DroneShield, which is not expected to dissipate any time soon," wrote Odell. A third factor is increasing concern by governments worldwide about the potential threat of drones being used for nefarious purposes.
"The geopolitical situation is a net positive for DroneShield, evident by recent drone attacks in Ukraine," Odell wrote.
Improving Financial Situation
DroneShield will be operating cash flow positive this year, Odell purported. Currently, it has about AU$28M in cash.
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Disclosures:
1) Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures For Peloton Capital, DroneShield Ltd., February 13, 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 $14m for DroneShield (DRO), announced February 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 12th February, Peloton Capital held c.400k 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.
