Codan Limited (ASX: CDA), established in 1959, is an Adelaide-based communication, metal detection and mining technology specialist.
Its remarkable growth in 2018 should draw some attention and seems a good reason to take a closer look at the company that soared 26.5% in a year that saw the ASX 200 tumble by 6.91%.
What’s Driving Codan’s Growth?
Starting out as an electronics engineering company with a focus on radio transmitters, Codan has diversified into mining technology and the recreational and professional metal detection markets.
The last few years have also seen new contracts with the US Army and Australian Defence through Codan Defence Electronics, demonstrating the promising nature of their newest foray into defence technology.
While this diversification takes place, sales remain strong in the largest sector of their business, metal and landmine detection. In fact, over the last three years, Codan has achieved profit/earnings growth of 22.72% annually, leagues above the industry average of 7.22%. On top of that, Codan’s return on equity (ROE) has averaged 21.73% over the same three-year period.
Although Codan continues to diversify, FY18 still saw about 71% of revenue coming from the metal detection sector through Minelab, a company they acquired in 2008.
Codan continues to focus on stabilising its revenue base through diversification and the big one to watch is their defence electronics sector, with the potential for large, long-term contracts that could provide consistent revenue for years to come.
Another important milestone is the partnership with Caterpillar Inc (NYSE: CAT) that began in February 2018. In FY19, Codan and Caterpillar plan to integrate technologies and distribute through Caterpillar’s established networks, so look out for increased sales and streamlined distribution.
All things considered, the promising growth and exciting opportunities, coupled with the recent slump in the share price to under $3.00, makes Codan a company to watch over the coming months.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
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