Codan Ltd (ASX: CDA) is not usually the first name investors think of when looking for defence exposure.
DroneShield Ltd (ASX: DRO) and Electro Optic Systems Holdings Ltd (ASX: EOS) are the usual candidates.
And while they are great options, I think Codan is an ASX 200 defence stock that deserves more attention.
The company has a mix of businesses that gives it exposure to several interesting long-term themes, including communications, defence, public safety, and gold detection.
That combination gives Codan more than one way to grow.
Image source; Getty Images
Mission-critical technology
The part of Codan I find most interesting is its communications business.
This division provides radio and tactical communications technology used in defence, security, emergency services, and other mission-critical environments.
These customers need equipment that works in difficult conditions, when reliability can be extremely important.
That is a very different market from consumer electronics.
I like businesses that serve demanding customers with specialised products. If the technology performs well, the customer relationship can be sticky and the brand can build credibility over time.
Defence and public safety spending can also have long-term support as governments focus more on security, resilience, and modernising equipment.
Codan is not a giant defence prime, and it will not suit investors looking only for large-scale weapons exposure. But I think its niche could be valuable.
Gold gives it another lever
Codan also owns Minelab, its metal detection business.
This gives the company exposure to recreational, artisanal, and professional gold detection demand. When gold prices are strong, interest in gold detecting equipment can improve.
I do not think Codan should be valued only as a gold-price play. That would be too narrow.
But I do like that Minelab gives the company another source of earnings that is different from tactical communications. It adds variety to the business and can perform well when demand for gold detection is strong.
The challenge is that detector demand can be cyclical. Product cycles are important, competition can affect sales, and some markets can be uneven.
But Codan has a long history in this category, and I think Minelab remains a valuable asset inside the group.
Why I'd buy
What I like about Codan is that it does not need one theme to do all the work.
The communications business can benefit from defence, public safety, and mission-critical technology demand. Minelab can benefit from gold strength and new product cycles.
That mix makes Codan different from many ASX industrial and technology shares.
There are risks to be mindful of. Government and defence-related sales can be lumpy, product execution matters, and currency movements can affect results. Investors should also expect some uneven periods, because this is not a simple recurring revenue software business.
But I think Codan has enough quality, specialist capability, and global opportunity to remain interesting.
Foolish takeaway
Codan may not have the same profile as some of the more obvious defence or technology shares on the ASX.
The company sits in specialised markets where reliability, product quality, and customer trust matter. It also has a gold-linked business that can add upside when conditions are favourable.
For investors looking for something a little different, I think Codan could be one of the more overlooked ASX shares to watch.
