DroneShield Limited (ASX: DRO)
Potential Game-changing order – DroneShield, a leading company in drone security technology based in Sydney, Australia and Virginia, USA climbed up by 13.88 per cent on 14 June 2018. It has developed pre-eminent drone security solutions that have helped in protecting people, organisations and critical infrastructure from intrusion from drones. It delivers world-class expertise in engineering and physics, and has a deep experience in defence, intelligence, and aerospace. The Group recently received an order for 70 units of its DroneGun™ tactical jammer product that will be used by the Ministry of Defence (the “MOD”) of a major Middle Eastern country and will be allied with the Western governments. This came out to be an order of approximately $3,200,000 that was placed for the MOD with the Company through distributor, Zariba Security.
Till now, it has been the largest known order globally for tactical drone mitigation equipment. It is also the first order for multiple DroneGun™ units and is the Company’s first multi-million dollar order. This was significant because the drone detection and mitigation industry is still at a nascent stage and allocations of substantial governmental funding for anti-drone equipment purchases have only commenced recently that is 12 months back. This move can be a game changer as the MOD has one of the largest defence budgets in the world and this kind of historic sale will make DroneShield as a leading player across the globe placing it well ahead of its competitors in the global anti-drone industry. This order comes against the backdrop of significantly intensified drone activity in the Middle East as a number of drone attacks were reported in the region since the beginning of the year.
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Share Price and Trading Volume Trend since IPO (Source: Company Reports)
The Company can fulfil this kind of order, only after taking an approval from a U.S. regulator overseeing defence exports but only a few Companies will be required to take such an approval since sales of some of the Company’s products to a number of countries allied with the United States do not require U.S. regulatory approval. It is expected that the Company will receive such approval, if it is granted, in the next two months using the established U.S. defence product sale approval process. The Company is already pursuing few contracts which were in its pipeline. It is expected that this validation by a demanding user will accelerate the adoption of its products by a range of governmental and corporate users globally and will accelerate the execution time-frame for its sales.
The Company has a robust balance sheet of approximately $3.8 million as at the end of March 2018 with zero debt. The stock prices declined by 34.55 per cent in last three months and were down by 5.26 per cent in last one month. The stock witnessed a huge recovery of 19.44 per cent just after the announcement of receiving this order from Ministry of Defence. While risks need to be borne in mind when looking at DRO, we give a “Hold” recommendation at the current market price of $0.205 as the management is setting to lay a healthy foundation for this kind of business which is being driven by the need for anti-drone products given the political framework across the globe.
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