InvestMacro

Source: Darren Odell  (3/15/23)

This Australian company, which is experiencing sales momentum and attracting defense contractors’ attention, also is a takeout target, noted a Peloton Capital report.

DroneShield Ltd. (DRO:ASX; DRSHF:OTC) will be operating cash flow positive by year-end and “is an acquisition target,” purported Peloton Capital analyst Darren Odell in a March 9 research note.

With respect to achieving this cash goal, the Australian counterdrone products and solutions company has the following many factors working in its favor, Odell wrote.

1) DroneShield recently raised AU$29.4 million (AU$29.4M) through its stock purchase plan resulting from the AU$10.9M placement last month.

“The recent capital raise has provided DroneShield the ability to build inventory in anticipation of material contracts (and fulfill smaller contracts faster) that are expected to close, in the short to medium term,” wrote Odell.

2) DroneShield recently landed two contracts totaling AU$22M.

3) The company has a robust AU$200M sales pipeline consisting of multiple contracts, each worth more than AU$10. Peloton Capital expects DroneShield to close three large and several smaller deals this year.

“Our DroneShield valuation to AU$0.84 is based on increased confidence on the closure of larger contracts in 2023 and beyond,” wrote Odell.

Compared to Peloton’s AU$0.84 target price, DroneShield’s current share price is about AU$0.335. The company is a Buy.

4) Existing contracted customers in the Five Eyes countries will likely buy more products from DroneShield.

5) The U.S. Department of Defense recommends DroneShield.

6) The Russia-Ukraine war has heightened interest in products like those sold by DroneShield.

Attractive to Potential Buyers

With respect to DroneShield likely being acquired, Odell indicated the following factors support the belief it will happen.

1) One of DroneShield’s shareholders, owning about a 5% interest, is Epirus, a California-based unmanned aerial vehicle firm.

2) Private equity backs DroneShield.

3) The U.S. government recommends DroneShield.

4) Global defense contractors have taken note of DroneShield and its recent contracts.

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.

2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. As of the date of this article, an affiliate of Streetwise Reports has a consulting relationship with: DroneShield Ltd. Please click here for more information. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.

3) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

4) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of DroneShield Ltd., a company mentioned in this article.

Disclosures For Peloton Capital, DroneShield Ltd., March 9, 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 $40.3m for DroneShield (DRO), announced March 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 9th March, Peloton Capital held c.1m 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.

By ForexTime 

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ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Source: Chris Thompson  (3/14/23)

The strategic merger between these two Canadian entities should enhance the acquirer’s “capabilities and growth potential,” noted an eResearch Corp. report. 

Data Communications Management Corp. (DCM:TSX; DCMDF:OTCQX) agreed to acquire the Canadian operations of R.R. Donnelley & Sons, called Moore Canada (RRD Canada), for CA$123 million (CA$123M), which should provide beneficial synergies, reported eResearch Corp. analyst Chris Thompson in a March 10 research note. The transaction should close in Q2/23.

“We believe the deal will be accretive to Data Communications Management’s financial profile as it accelerates [the company’s] revenue and EBITDA growth and diversifies its revenue base,” Thompson wrote. “It could help accelerate sales growth, lower some organizational costs, and enhance operational efficiency, which could lead to an improved overall financial performance.”

In other news, the analyst reported Data Communications reported strong preliminary full-year 2022 (FY22) financial results, noteworthy for higher-than-expected revenue as well as year-over-year (YOY) increases in revenue, gross profits, and EBITDA.

Boosts to Target Price

Thompson highlighted that the merger and strong FY22 are “positive for the company valuation, according to our model.” Incorporating last year’s revenue increases eResearch’s target price on Data Communications to CA$4.59 per share, whereas accounting only for the acquisition takes it to CA$5.92 per share. Combining both raises it to CA$6.02 per share.

Data Communications is rated Buy.

The private equity investment firm, however, plans to keep its target price as is, now CA$4.50 per share, until the merger closes or final FY22 financial results are released.

Compared to the current CA$4.50 per share target price, this provider of marketing and business communication solutions is currently trading at about CA$2.06 per share, noted Thompson. This price difference implies significant potential gains for investors. Data Communications is rated Buy.

Impacts of the Deal

Thompson highlighted the acquisition should boost Data Communications’ capabilities and growth potential given RRD Canada’s “highly complementary” operating model and the expectation RRD Canada will bring online more products, services, and technological abilities.

RRD Canada provides print and print-related services to thousands of Canadian customers through 10 locations and with 1,000 employees. Last year, RRD generated about CA$250M in revenue. With the merger, Data Communications will be able to offer RRD’s services and solutions to its existing customers and take advantage of cross-selling opportunities.

According to the terms of the share purchase agreement, Data Communications will acquire three RRD Canada-owned sites at an implied value of about CA$30M. After closing, Data Communications plans to pursue a sale and leaseback agreement for each of these locations.

The acquisition would take Data Communications’ 16 locations to 21 and its number of enterprise clients to 400-plus from 250. These additional clients would add scale, for instance, to Data Communications’ marketing workflow technology platform, DCMFlex, and its digital asset management platform, ASMBL.

Snapshot of 2022 Finances

For FY22, Data Communications reported preliminary revenue of between CA$270M and CA$274M. This is higher than eResearch’s estimate of $265.3M and reflects a 15–16.5% increase over FY21 revenue.

Similarly, gross profit last year was between 30.5% and 31%, up 20–21% from that in FY21. FY22 EBITDA was between CA$35.5M and CA$36.5M, a 41–45% YOY increase.

Total debt, net of cash, down dropped about 35% from 2021’s amount. Data Communications plans on paying for the acquisition of RRD entirely through committed credit facilities noted Thompson.

Data Communications is scheduled to release full financial FY22 results on March 21, 2023, and hold an investor call and webcast the next day.

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Disclosures:

1) Doresa Banning wrote this article for Streetwise Reports LLC as an independent contractor. They or members of their household own securities of the following companies mentioned in the article: None. They or members of their household are paid by the following companies mentioned in this article: None.

2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Data Communications Management Corp. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.

3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.

4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.

5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

Disclosures for eResearch, Data Communications Management Corp., March 10, 2023

ANALYST ACCREDITATION

eResearch Analyst on this Report: Chris Thompson CFA, MBA, P.Eng. Analyst Affirmation: I, Chris Thompson, hereby state that, at the time of issuance of this research report, I do not own common shares, share options, or share warrants of DATA Communications Management Corp. (TSX:DCM).

eRESEARCH DISCLOSURE STATEMENT

eResearch is engaged solely in the provision of equity research to the investment community. eResearch provides published research and analysis to its Subscribers on its website (www.eresearch.com), and to the general investing public through its extensive electronic distribution network and newswire agencies. eResearch makes all reasonable efforts to distribute research material simultaneously to all of its Subscribers. eResearch does not manage money or trade with the general public, provides full disclosure of all fee arrangements, and adheres to the strict application of its Best Practices Guidelines. eResearch accepts fees from the companies it researches (the “Covered Companies”), and from financial institutions or other third parties. The purpose of this policy is to defray the cost of researching small and medium-capitalization stocks which otherwise receive little or no research coverage.

DATA Communications Management Corp. paid eResearch a fee to have it conduct research and publish reports on the Company for one year.

To ensure complete independence and editorial control over its research, eResearch follows certain business practices and compliance procedures. For instance, fees from Covered Companies are due and payable before research starts. Management of the Covered Companies is sent copies, in draft form without a Recommendation or a Target Price, of the Initiating Report and the Update Report before publication to ensure our facts are correct, that we have not misrepresented anything, and have not included any non-public, confidential information. At no time is management entitled to comment on issues of judgment, including Analyst opinions, viewpoints, or recommendations. All research reports must be approved, before publication, by eResearch’s Director of Research, who is a Chartered Financial Analyst (CFA).

All Analysts are required to sign a contract with eResearch before engagement and agree to adhere at all times to the CFA Institute Code of Ethics and Standards of Professional Conduct. eResearch Analysts are compensated on a per-report, per-company basis and not based on his/her recommendations. Analysts are not allowed to accept any fees or other considerations from the companies they cover for eResearch. Officers, analysts, and directors of eResearch are allowed to trade in shares, warrants, convertible securities, or options of any of the Covered Companies only under strict, specified conditions, which restrict trading 30 days before and after a Research Report is published.