{"id":8725,"date":"2024-04-23T19:21:43","date_gmt":"2024-04-23T19:21:43","guid":{"rendered":"https:\/\/economicherald.net\/?p=8725"},"modified":"2024-04-23T19:21:43","modified_gmt":"2024-04-23T19:21:43","slug":"moneytalks-heres-one-asx-defence-stock-that-could-emerge-a-winner-from-geopolitical-tailwinds","status":"publish","type":"post","link":"https:\/\/economicherald.net\/?p=8725","title":{"rendered":"MoneyTalks: Here\u2019s one ASX defence stock that could emerge a winner from geopolitical tailwinds"},"content":{"rendered":"<p>Sequoia initiates coverage on Highcom amid geopolitical tailwinds<br \/>\n\u00a0Highcom has evolved into a leading provider of advanced body armour protection<br \/>\nDespite facing recent setbacks, Sequoia anticipates recovery soon\u00a0<\/p>\n<p>\u00a0<\/p>\n<p><strong>Sequoia<\/strong> has initiated coverage on <strong><a href=\"https:\/\/stockhead.com.au\/company\/highcom-hcl\/\">Highcom (ASX:HCL)<\/a><\/strong>, with a <strong>12-month price target of 25c<\/strong> (versus current price of 15c).<\/p>\n<p>Formerly called XTEK, Highcom is a $15m market-capped company providing world-leading lightweight body armour protection products for high risk, mission critical operations.<\/p>\n<p>The company designs, manufactures, and supplies global military, law enforcement, and first responder customers with advanced personal protection ballistic products and solutions like body armour and ballistic helmets.<\/p>\n<p>Sequoia believes Highcom has strong macro tailwinds from global conflicts and rising geopolitical tensions, events that will continue to drive increased military spending at least into the medium term.<\/p>\n<p>Another tailwind is the fragmented law enforcement industry in the US \u2013 which underpins a very large, addressable market for protective hardware.<\/p>\n<p>\u00a0<\/p>\n<h2>Company background<\/h2>\n<p>At the time of its listing in 2005, <a href=\"https:\/\/www.highcomarmor.com\/key-facts\/\" target=\"_blank\" rel=\"noopener\">Highcom (then called XTEK)<\/a> was a reseller of agency products, focussed on the Australian homeland security market with revenue largely sourced from explosives and small contributions from forensics, weapons and ammunition.<\/p>\n<p>It was essentially a defence items procurement business with a single customer, the <em>Australian Department of Defence.<\/em><\/p>\n<p>Through to around 2009 and 2010, revenue was volatile and subject to unsustainable \u201csugar hits\u201d with profitability hard to achieve. Through the teens (2010-2019), the company gradually restructured its revenue base by exiting agency lines and re-shaping its product profile.<\/p>\n<p>\u201cNotably in 2010, it established a relationship with <em>AeroVironment<\/em>, a US manufacturer of Unmanned Aerial Systems (UAS) which was formalised in an agreement in 2016. This relationship now underpins the Highcom Technology division,\u201d explained Sequoia.<\/p>\n<p>\u201cDuring this period, the company also invested heavily in R&amp;D, developing and optimising its XTclave and XTatlas technologies\u201d<\/p>\n<p>Since then, Highcom has undergone significant changes, positioning itself in the US law enforcement and military markets, particularly with its body armour products.<\/p>\n<p>The company\u2019s lightweight body armour is considered top-notch, thanks to its XTclave technology. By acquiring US-based Highcom Armor and relocating its operations to the US, Highcom has now established a strong foothold in the American market.<\/p>\n<p>\u201cIts body armour protection products have emerged as the company\u2019s largest business unit and the strategic priority as a growth driver,\u201d said Sequoia.<\/p>\n<p>\u00a0<\/p>\n<h2>Rebound from setback<\/h2>\n<p>Despite record EBITDA in FY22 and FY23, Highcom faced a setback in H1 2024 due to various factors such as failed contracts, relocation costs, and management errors. The CEO was replaced in the interim by the chairman whilst a search for a replacement is conducted.<\/p>\n<p>\u201cThe obvious questions are whether this is merely a temporary setback and how quickly can profitability be restored,\u201d Sequoia noted.<\/p>\n<p>The company has said that it expects to recover soon, especially with the XTclave technology coming online and favourable market conditions, including increased military spending globally.<\/p>\n<p>\u201cWe believe that Highcom could return to previous levels of revenue and EBITDA in FY26, and from there, launch a sustained period of growth,\u201d said Sequoia.<\/p>\n<p>\u201cThis will, however, be subject to the availability of resources, particularly financial to enable it to effectively pursue its strategies.<\/p>\n<p>\u201cBased on the favourable market conditions for the company, especially in the US and our expectations of a return to profitability and growth in FY25 and FY26, we have a 12-month price target of 25 cents per share,\u201d said Sequoia.<\/p>\n<p>\u00a0<\/p>\n<p>\u00a0<\/p>\n<p>\u00a0<\/p>\n<h2>Highcom share price today:<\/h2>\n<p>\u00a0<\/p>\n\n<p><span class=\"mce_SELRES_start\">\ufeff<\/span><span class=\"mce_SELRES_start\"><\/span>\u00a0<br \/>\n<span class=\"et_bloom_bottom_trigger\"><\/span><\/p>\n<p>The post <a href=\"https:\/\/stockhead.com.au\/tech\/moneytalks-heres-one-asx-defence-stock-that-could-emerge-a-winner-from-geopolitical-tailwinds\/\">MoneyTalks: Here\u2019s one ASX defence stock that could emerge a winner from geopolitical tailwinds<\/a> appeared first on <a href=\"https:\/\/stockhead.com.au\/\">Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"<p>Sequoia initiates coverage on Highcom amid geopolitical tailwinds \u00a0Highcom has evolved into a leading provider of advanced body armour protection Despite facing recent setbacks, Sequoia <a href=\"https:\/\/economicherald.net\/?p=8725\" class=\"read-more-link\">[more&#8230;]<\/a><\/p>\n","protected":false},"author":0,"featured_media":8726,"comment_status":"","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-8725","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - 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