Defence smallcap Droneshield (ASX:DRO) on Monday revealed its execution of a new $11 million contract with an unnamed government agency. This is the second contract of this size that Droneshield has won in as many months.
In late December, the smallcap landed on the ASX Top Gainers chart at Market Index when it first announced another $11M order. Today’s new contract comes from a different government agency.
Due to the nature of the contracts (security implications), the smallcap does not usually name the recipients of its hardware.
Monday’s announcement did not mention the USA, where Droneshield is recognised by that country’s defence procurement officials.
Droneshield won similar recognition from Canberra back in September.
Today’s contract (and the last one of identical value) both include recurring annual subscription components, which Droneshield expects to underpin revenue growth in the years ahead.
“As we move into repeat $10 million+ orders, DroneShield has arrived at its inflection point,” Droneshield chief Oleg Vornik said.
“Importantly, this order does not require working capital, due to the payment structure from the customer.”
“Like with the other $11 million order received last month, the purchase contains an annual subscription component, as we move to annual recurring revenues becoming a meaningful part of our business.”
The company also stands the likely beneficiary of what Bell Potter calls a global defence rearmament thematic, borne from Russia’s war in Ukraine.
Evidence for that view could be supported by some of Droneshield’s latest announcements.
Back at the start of January, an officer patrolled the Brazilian inauguration with one of the company’s anti-drone knockdown guns. No forecast for material revenues were attached to that highlight.
Market Index’s broker consensus scan shows 4 brokers recommend “buy” for DRO with one broker saying “hold.”
The company’s share price was up 12% in the first hour of trade to 28c.
The company has a market cap of $126.2 million at the time of writing.
One year returns are up 60%.
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