Needing "patience" while being "stuck" is certainly the case. The business path into the Defence space is a long winding one and it is a very high risk strategy to put too much reliance on solely the Defence market especially when you are 2nd and 3rd tier provider because you are at the mercy of the big boys like KPMG etc. Many of them will want AR9 within their bid to provide leverage and if the bid is successful the negotiation process begins for AR9 of how much of the revenue pie will be for AR9. Defence will always be an important and probably main sector however the way to mitigate that risk is to diversify and they have not diversified enough - that is a Board failure. It's the Board's responsibility to monitor business risk. We don't want diversify to the point whether they are too thin but they need to have 2 or 3 sectors with focus for considerable marketing effort. I feel here we have huge effort to Defence at the expense of other sectors and now we are paying the price.
I see further damage before it will get better.
The capital raise that will be required before year end will drag the share price down further. Couldn't pick a worse time for a capital raise.
The expectation of becoming cash flow positive will have to be delayed.
Even if they do win or part of a conglomerate that wins a Defence contract it will be more than 12 month before we see cash coming through the door. The lead contractor will need to establish their arrangements first and then there will be the 2nd and 3rd tier providers.
That said I think it could do well in the long term - about 3-4 years. The key question then remains is about opportunity cost. Currently there are much better opportunities elsewhere in the market. I don't think anyone is "stuck" - we are free to offload at anytime and invest elsewhere.
AR9 Price at posting:
8.5¢ Sentiment: Hold Disclosure: Held
