Mid cap BUY – Codan Limited (ASX:CDA) is a $1.4B South Australian company that develops technology to solve communications, safety, security, and productivity problems in the harshest environments on earth.
Over the past 50 years, CDA has become a global leader in long-range radio communications, metal detecting technologies, and defence electronics. CDA is also utilising its specialised communications IP to develop tracking and positioning systems for safer, more efficient mining operation and fleet management.
CDA’s products are sold in more than 150 countries around the world with customers including the world’s largest aid and humanitarian organisations, security and military groups, mining companies, governments, and adventurers.
The company recently won several major radio communications contracts, suggesting good execution in the division, despite the COVID-19 pandemic.
Meanwhile, its metal detector business (approx 60% of sales) is enjoying extremely strong tailwinds from record gold prices driving demand from artisanal miners in Africa and South America.
Due to these factors CDA has twice upgraded its full year 2020 sales and profit forecasts. and we would anticipate continued upwards trends in early 2021, given the rising price of gold.
CDA has a pristine balance sheet with $85M in net cash and trades on respectable 21x 12 month earnings forecasts, which is very attractive given the outlook for double-digit earnings growth in each of the next 2 years (at least).
CDA provides an opportunity to enter a high-quality business with strong current conditions, management that is delivering, and an excellent balance sheet for protection against any unforeseeable issues that may arise amidst the global Covid-19 pandemic.
Read more about Codan Limited here.