RADA Electronic Industries

US: RADA

$251.8m market cap

$5.79 last close

RADA Electronic Industries develops, manufactures, markets and sells defence electronics to various armed forces and companies worldwide. It offers land-based tactical radars for defence forces, critical infrastructure protection solutions and military avionics systems.

Investment summary

As the threats from drones, unmanned aircrafts and Anti-Tank Guided Missiles (ATGMs) proliferate, so does the need to defend against them. Israel’s RADA Electronic Industries (RADA) was the first mover in mini tactical radars that form part of defense systems tracking and neutralizing incoming threats. With combat experience, a successful track record and a presence in the US, RADA is well placed to transition from supplying the US and other militaries under urgent operational need programs, to longer-term and more sizeable production programs. RADA’s PEG ratio of 0.88x is at a 44% discount to peers despite significantly higher growth expectations. In our view a PEG of 1.2x or $10 per share would better reflect the 32.1% CAGR in EPS from 2020–24e.

Y/E Dec
Revenue (US$m)
EBITDA (US$m)
PBT (US$m)
EPS (c)
P/E (x)
P/CF (x)
2018A 28.0 1.8 1.1 1.08 536.1 N/A
2019A 44.3 0.3 (1.1) (1.08) N/A N/A
2020E 71.6 7.4 5.4 5.40 107.2 N/A
2021E 107.4 13.4 11.2 11.16 51.9 30.3
Industry outlook

The combination of a less hawkish administration in the US following the November election and COVID-19-related pressures could pressure defence spending in the US. RADA’s markets are deemed priorities and as such are likely to remain broadly unaffected. Indeed, if defence budgets shrink there could be more of a focus on modernisation programs.

Last updated on 24/09/2020
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Sector
Industrials
Share price graph
Balance sheet
Forecast net cash (US$m) 25.5
Forecast gearing ratio (%) N/A
Price performance
%
1m
3m
12m
Actual (18.8) (7.8) 14.0
Relative* (14.2) (13.4) 4.1
52-week high/low US$7.7/US$2.2
*% relative to local index
Key management
Dubi Sella CEO
Avi Israel CFO