Conversation 172: Oleg Vornik DroneShield.
DroneShield doubles staff numbers in anticipation of large scale orders from US Department of Defence.
DroneShield Limited (DRO) designs detection systems that use specialised technology to achieve levels of precision and sensitivity that are not possible with other methods. The Company has developed multilayered pre-eminent drone detection and disruption solutions that protect people, organisations and critical infrastructure from intrusion from drones.
One of the great things about DroneShield is that it is an Australian company that’s kicking some series technology goals internationally.
But as you will see below, according to Morningstar’s quant rating, as a write, it is undervalued by ~40%.
I am not saying quant ratings are the be all and end all of valuing, but when you take a look at the organisations DroneShield has done business with in the first half of their financial year, it makes sense.
Their half year report for the 2020 year (DroneShield operates on a calendar year) showed contract wins and successful trials with high profile marquee customers, across a range of DroneShield products including:
European Union Police 4-year framework agreement for DroneGun TacticalTM units.
European Ministry of Defence purchase of RadarZeroTM and DroneShieldCompleteTM .
US State Department order for RfPatrol MKIITM, DroneGun MKIIITM, and DroneNodeTM - first fixed site deployment for detect-and-defeat DroneSentryTM system for the U.S. Air Force.
Airport deployment of DroneSentinel; with Deutsche Telekom, in a lead up to a major tender for European airports in late 2021.
Purchases of RfPatrol MKIITM and DroneGun TacticalTM units by Australian and NZ militaries.
Since that report at the end of August, DroneShield has racked up a series of very interesting announcements.
These have included two separate European government orders, funding of a development deal from the US Department of Defence, which I discuss in detail in my interview with CEO Oleg Vornik, and a deal with a major South East Asian army.
The US DoD order is of particular interest as Vornik says it will lead to a series of purchases that will be susbtantially greater than the second $600K order received from the EU Police deal.
Financially, DroneShield seems to be making good progress toward profitability. The net loss after tax for the half-year was $1.17 million (corresponding 2019 half year: loss of $2.67 million).
The Group achieved revenue from customers of $3.07 million for the 1H20 half-year, an increase of 29% relative to the prior half-year and again, Vornik is optimistic that the second half will yield a much better result that the first.
So why doesn’t the share price seem to reflect all this? Is it due to the lumpy nature of DroneShield’s revenue? I put this to Oleg Vornick at the start of our Conversation.
Oleg Vornik says he is extremely confident $60 to $70 million mid east contract signing is imminent.
DroneShield recently undertook a Share Placement Program which attracted $17m in applications but due to ASX Listing Rules, the company scaled back applications and accept $9.5m (before costs) in applications. The purpose of the SPP was….
“ …to rapidly scale DroneShield’s growth in our target markets.”.
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SHARE PRICE TREND OVER 200/100/9 DAYS l ANALYSTS VIEWS l TECH AND COMMERCIAL READINESS INDEX l ACTIVE SHARE PRICE CHART
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TECHNOLOGY AND COMMERCIAL READINESS.
Based on the Technology Readiness Level [TRL] developed by NASA and the Commercial Readiness Index [CRI] that grew out of it. DronShield would fit somewhere around the 3 to 4 on the CRI.
SOME OF THE RECENT MARKET ANNOUNCEMENTS BY IMEXHS:
Appendix 4D For the half-year ended 30 June 2020
SOME RATINGS FOR IMEXHS [ASX:IME]
[CURRENT ON TUESDAY SEPTEMBER 16TH 2020]
Morningstar Quantitative [algorithmic] Rating *
Valuation Rating: Undervalued Fair Value Estimate: 0.342 Fair Value Percentage Diff: 41.45% Liquidity:High
DISCLOSURE
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* The Morningstar rating uses a machine-learning model to rate 22 times more funds than are rated by Morningstar analysts in EMEA and Asia.
The Quantitative Rating is an extension of the recently enhanced Morningstar Analyst RatingTM for funds (Analyst Rating), which provides an analyst's forward-looking assessment of a fund's ability to outperform its peer group or a relevant benchmark on a risk-adjusted basis over a full market cycle. Morningstar EMEA and Asia manager research analysts assign Analyst Ratings to approximately 1,260 open-end and exchange-traded funds and together with the Quantitative Rating, cover approximately 29,200 funds, representing nearly 105,000 share classes in EMEA and Asia.