A little bit of deja vu recalling the run up to $20 2-3 years back
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CDA announced an acquisition to its Tactical Communications division yesterday, revealing it has entered a binding agreement to purchase SKT2 LLC dba Kagwerks (Kagwerks) for an upfront consideration of A$33.6m, on an attractive FY25 EBITDA multiple of 3.1x-4.2x. Kagwerks is a US based provider of tactical operator-worn networking communications technologies used in a military environment.
CDA have established a strong track record of M&A, and we continue to see potential for further purchases. Post completion, we expect Kagwerks DOCK platform to benefit from the greater scale, distribution and access to a larger addressable market. The acquisition is to be funded by existing debt facility with settlement expected by Dec-24. Based on FY25 guidance for revenue of A$49m-57m and EBITDA of A$8m-11m, we estimate the acquisition will be ~4% accretive to our FY26 estimates, and we now forecast FY25 ND/EBITDA of 0.5x.
We continue to view CDA as a high quality business with a strong growth profile, operating in an industry with ongoing tailwinds. We also continue to see valuation upside, noting its discount to international peers despite its higher growth and margin profile.
We raised our target price to $16.76 (from $15.34) and retain our BUY rating
CDA Price at posting:
$16.41 Sentiment: Hold Disclosure: Held
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