Codan Limited (ASX: CDA) has been one of the surprise favourites of the recent reporting season after it reported a 12% lift in revenue, a 33% lift in underlying net profit to $6.01 million, and a 1.5 cent per share interim dividend for the first half of the 2015 financial year.
The solid half has culminated in a 28% lift in the share price over the first two months of the year, but shareholders must be wondering if it can go even higher in 2015.
What does Codan do?
Codan designs and manufactures a range of high-value-added radio communications systems, metal detectors and mining safety/productivity solutions. Codan's products generally sell at a premium to rivals due to their superior features.
The radio business, conveniently named Codan Radio Communications, offers a series of HF transceivers that can handle voice communications, data, email, fax, chat, GPS tracking, security and interoperability. The group's Envoy system is the world's most advanced commercial HF radio and allows users to upgrade the unit over time instead of replacing it, giving the company a source of recurring(ish) revenue.
The gold detector business offers a range of units that cater for consumer, mining and countermine levels of technological abilities and price points. Two new models are due in 2015. They aim to counter counterfeiting and offer greater capability to amateurs.
Finally, the mining technology business offers real time situational awareness to mining company assets aimed at improving safety, security and productivity.
What does 2015 hold?
Codan's business is heavily leveraged to resource prices, especially the gold price, and can be lumpy depending on the timing of major contract wins. Codan's management team has not stated an explicit goal for full-year earnings, however a stronger second half is suggested from both analysts and the company.
First half underlying earnings per share of 3.4 cents could double to 6.8 cents for the full year, placing the company on a forward price-to-earnings ratio of 15. Notably, some shareholders remain confident in its long-term prospects and are happy to receive the 3% dividend yield while they wait for developments.