Shedding light on Aerial Technology and ASX Beneficiaries: XTE, NEA

Shedding light on Aerial Technology and ASX Beneficiaries: XTE, NEA

Summary

  • The aerial technology is ready and is catching up in times of COVID-19 necessity; the golden age of drones has finally arrived.
  • Drones have been part and parcel of businesses, military, and government organisations worldwide, with its usage in Aerial photography for journalism and movies, research and rescue operations, border control surveillance, express shipping, target decoy and many more.
  • XTE share price moved up 4.294% on 9 July due to a notification on securing additional purchase order worth AU$2.8 million from Australian Defence Force (ADF) for the supply of SUAS, reflecting the strengthened relationship with ADF.
  • NEA achieved another significant milestone in early June by commercially launching Nearmap AI (series of new AI data products), accessible through a self-service export and offline channels in Australian and the US markets.

Technology has played a pivotal role in bringing changes in the contemporary world, with the advancement at an unbeaten pace. During the most challenging times like coronavirus, technological breakthroughs have provided promising innovative solutions.

Lately, we are evolving into the aerial age with drones, personal flying vehicles, drone footage and air taxis, which might become a part of our everyday life in the near future.

The way the world had been viewing drones has been changing now.

Did you ever consider drones to be buzzing nuisance around your head?

Well, the world is changing its stance towards drones.

Whether you call them flying mini-robots or Unmanned Aerial Vehicles (UAVs) or Miniature Pilotless Aircraft, drones are swiftly building up in popularity and are now acting as life-saving tools in combating COVID-19 pandemic.

Drones have become central to the functioning of numerous businesses, military, and government organisations across the globe, and have managed to light up those areas where its presence is required.

They can carry multiple items ranging from high-resolution cameras, speakers and scanners and thermal image technology to delivery services.

Drones have numerous uses for individuals, businesses, military, and governments as follows-

  • Disaster response,
  • Aerial photography for journalism and film,
  • Research and rescue operations,
  • Border control surveillance,
  • Law enforcement,
  • Storm tracking,
  • Express shipping and delivery,
  • Target decoy,
  • Supervision and
  • Research and development.

It does not matter whether drones are controlled by a remote or accessed through a smartphone application, they have the ability to reach most distant places with less or no workforce, with least amount of effort and time.

This is one of the significant reasons for adoption by four sectors: Personal, Commercial, Military, and Future Technology.


Let us now look at two of the ASX beneficiaries from Aerial technology.

XTEK Limited (ASX:XTE)

XTEK offers superior quality goods and customised solutions to military, law enforcement, commercial and space, as well as government agencies.

XTEK’s share price ended the market session, up by 4.294 per cent to AU$0.850 (on 9 July 2020) following the announcement of additional ADF SUAS purchase order.

XTEK secured an additional purchase order from ADF for SUAS

On 9 July 2020, XTEK received a purchase order of AU$2.8 million from ADF (Australian Defence Force) for the supply of its extra AeroVironment WASP AE SUAS (Small Unmanned Aerial Systems).

This new order is in addition to the ongoing SUAS supply contract to the ADF and would be delivered in FY’21.

The order reflects a strong relationship of the Company with ADF, with XTEK having delivered above 50 AeroVironment WASP SUAS to date.

Did you read; XTEK Limited Receives Additional Purchase Order From ADF For Additional SUAS

On 6 July 2020, XTEK announced that it anticipates FY’20 revenue to be more than AU$42 million, representing growth of at least 10 per cent from FY’19 revenue of AU$37.9 million.  

As per the announcement, the growth in the revenue is underpinned by robust performance in the newly acquired HighCom Armour Solutions Inc. (in the US) and supply and support of the current SUAS.

XTEK also highlighted that it was well placed to serve a growing interest in its ballistic solutions and expected to receive more orders in the near-to-medium term, fostering future revenue anticipations.

Moreover, the improvement observed in the manufacturing capabilities would, in turn, enhance production capacity and boost annual revenue up to ~ AU$40 million.

A sneak peek at the recent activities of XTEK:

  • On 22 June 2020, XTEK and its partner Skykraft Pty Ltd were granted ASA (Australian Space Agency) Grant for the design and development of a SmallSats constellation launch stack system.
  • In mid-May, the Company secured a loan Facility of AU$2.5 million from the Commonwealth Bank of Australia (ASX:CBA) to enhance equipment for the mass production of ballistic helmets.
  • On 5 May 2020, XTE received its first international order worth AU$1 million for XTclave™ manufactured ballistic plates from CPE Production Oy, who is a supplier to the Finnish Defence Forces and other defence customers in the European market.
  • On 19 March 2020, XTEK received its first commercial order for XTclave™ created ballistic armour plates from Totes Systems (Australia) to be utilised in real operations via an Australian Specialist Law Enforcement unit.

Did you read; Lens on Defence and Aerospace Sector Players: OEC, QHL, XTE, EOS

Nearmap Limited(ASX:NEA

NEA is an Australia based company that functions in the areas of aerial imagery, which enables companies to utilise precise location data.

Commercialisation of Nearmap AI in Australia and the US

In May end, NEA notified that it would launch Nearmap AI in Australian and the US region on 1 June with commercial availability via self-service exports and offline channels.

Initially, the Company was noted to target its series of new AI data products in the insurance, utility and local government markets as these markets witnessed strong demand for the new product while it was still in the beta version.

NEA said that the launch of this product represents another significant milestone achieved by the Company after commercially rolling out 3D and roof geometry in the past. 

Did you read; 3 Stars for these 3 Stocks – PPH, NEA, HVN

Further on 28 May 2020, NEA unveiled that its Annualised Contract Value (ACV) is indicating continuous growth surpassing AU$102 million.

Furthermore, NEA provided a trading update in April, announcing the launch of AI content, as well as an update on its cost management initiatives adopted amid COVID-19. Some of the other mentioned points are as follows:

  • NEA expects FY’20 ACV portfolio value between AU$103 million - AU$107 million based on its recent trading.

 

  • NEA was on track to deliver cashflow breakeven target by the end of June 2020 and anticipates a closing cash balance for FY’20 in the range of AU$32 million – AU$35 million.
  • NEA noted robust sales activity levels amid pandemic with 12-month rolling customer churn below 10%, down from 11.5% (reported at the end of 2019).

The aerial imaging business had implemented numerous cash management initiatives to preserve its cash position and strengthen its balance sheet.

The cost reduction measures taken were decrease in compensation of the management and employees, deferred short-term incentive bonus, and other cost cuttings without impacting investment in the Company’s growth initiatives at the time of pandemic.

ALSO READ: Guide to Portfolio Strategies and Investment Avenues to Wade Through COVID-19 Crisis

As on 9 July 2020, the shares of NEA last traded at AU$2.42, up by 0.833% as compared to its previous close.

 

 


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