Highcom (ASX: HCL) – a homeland security provider

COMPANY SCOREBOARD

Pro Plus	Pro	Con Plus	Con
Geopolitical environment supporting large defence budget		Low gross margin No ongoing recurring revenue Low management credibility Low technology products

ABOUT COMPANY

Highcom (HCL) (https://highcom.group/) is an international defence industry company listed on the ASX, operating as two distinct divisions, namely Highcom Armor and Highcom Technology.

In July 2019, the company acquired a US body armour and personal protective equipment company, HighCom, for 4m shares@45c and $1.8m cash. In CY2018.

CAPITAL STRUCTURE


ASX Code	Share Price	Shares	Option (In)	Market Cap	Cash/Asset ($m)
HCL	$0.185	102,682,672		18,996,294	5/31


Holders No	Top 20 (Cur)	Top 20 (Pre)	Director Hold	Performance Right	Note
2,341	40.90%	40.18%	0%		last raise $7.7m@26c; pre raise $11m@69c

All old directors resigned during FY21. Uwe resigned in February 2022 for medical reasons, he sold 2m shares@50c (still holds 3m) in October 2022. The successor CEO resigned again in Feb 2024 after a really bad year.

BUSINESS

Below is the company’s past three years performance


HCL	2024	2023	2022	2021	2020
Operation Revenue	$45,319,192	$89,428,127	$58,176,725
Cost of Sale	-$31,909,174	-$60,465,174	-$32,979,100
Gross Revenue	$13,410,018	$28,962,953	$25,197,625	$0	$0
Gross Margin	29.59%	32.39%	43.31%	0.00%	0.00%
Overheads	-$17,239,523	-$18,134,850	-$16,836,163
Fixed Overheads
Variable Overheads
Total Operation Expense	-$17,239,523	-$18,134,850	-$16,836,163	$0	$0
Operation Profit	-$3,829,505	$10,828,103	$8,361,462	$0	$0
Other Revenue	-$5,371,896	$852,614	$455,137
Interest Expense	-$255,430	-$111,158
D&A	-$1,897,580	-$1,904,560	-$1,651,533
Income Tax	-$441,795	-$2,815,030	-$1,426,336
Net Profit	-$11,796,206	$6,849,969	$5,738,730	$0	$0
NOTES	$5.9m impairment

The company mismanaged the opportunity of multi-year SUAS supply contract by using a large proportion of the margin for self-rewarding.

For FY25, if the company sells $40m armors, out of which $30m outside of Australia. This equals to about 3x Highcom FY19 sales, which will give about $10m valuation based on 2018 acquisition metrics, and maybe $20m-$25m for the whole company including Australia sales, XClave and SUAS.

SUMMARY

The company seems to have found a good CEO.