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Advanced Braking share price soars more than 40% with licence agreement

The Advanced Braking Technology Ltd (ASX: ABV) share price is currently trading more than 44% higher today after announcing a new licencing agreement.

Who is the new licencing agreement with?

Advanced braking announced that the company has entered into a technology licencing agreement with VEEM Ltd (ASX: VEE) to provide braking solutions for the Hawkei PMV-L project. The Hawkei PMV is a light 4-wheel drive vehicle that is designed to meet the standards of the defence sector. The agreement will see Advanced Braking manufacture and supply 1,100 park brake mechanisms for the project.

The licence agreement involved 2 phases. Phase 1 will see Advanced Braking design and test a prototype and phase 2 will see the manufacturing and supply of the mechanisms. According to Advanced Braking, the contract value across phase 1 and 2 is approximately $760, 000. In addition, Advanced Braking will supply spare parts and consumables for the life of the product.

The company’s management acknowledged that the contract will allow Advanced Braking to achieve its strategic objective of diversifying its client base. As a result, the licencing agreement may provide Advanced Braking with a competitive advantage to offer customised solution services to other international fleet providers. These include vehicles for military, humanitarian and emergency services.

What does Advanced Braking do?

Advanced Braking is an Australian-based company that designs, manufactures and distributes innovative braking solutions. The company services a diverse range of industries who emphasise and require high safety standards. These include mining, defence, civil construction and waste management industries. Advanced Braking’s products offer unparalleled safety, improved productivity, zero emissions and durability.

During the coronavirus pandemic, Advanced Braking’s operations continued to function with the company maintaining its service levels. In addition, the company’s primary base remained in the mining and civil construction industries which continued to operate during the pandemic.

In an operational update released in late April, Advanced Braking reported a 29% increase in operating sales for FY20. The company also achieved positive EBITDA for Q3 FY20, resulting in 4 consecutive quarters with positive EBITDA.

The Advanced Braking share price

At the time of writing the Advanced Braking share price is trading 44% higher for the day. The company’s share price soared more than 400% from Thursday’s close to the high of 13 cents earlier today.

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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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