Codan: Metal detectors making money

A lift in sales leads to profit upgrade for the metal-detector-to-communications company

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published April 18, 2012 5:41 pm AEST

Codan Limited (ASX: CDA) today upped its net profit forecast for financial year 2012 from $20m to $26m. Sales of gold detectors have apparently gone bananas in Africa. Maybe the locals haven't seen the falls in the price of gold lately, or maybe they are hopeful of that once in a lifetime gold nugget find.

Actually, the real reason is that Codan has spent the last twelve months promoting its market leading detectors in other parts of Africa, and it's starting to show results. Coupled with efforts to ensure customers can more easily purchase 'genuine' products, sales demand has lifted. (Codan was previously having issues with fake metal detectors being sold as Codan's products.)

Radio Communications

Codan also runs a radio communications business, making high frequency and satellite communications equipment for global security, military and peace keeping sectors. The company advised that this business continues to expand its product offering and customer base, and will deliver a significant profit improvement this year. This segment reported a 41 per cent increase in revenues to $69.8m for the 2011 financial year and represented 41 per cent of the company's 2011 revenues.

Minetec

The Minetec division also reported a strong first quarter under Codan's ownership, and remains on track to deliver the forecast $1m Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA). Codan acquired Minetec for $10m in January 2012. The company designs and manufactures a range of communications solutions for the mining sector, and looks like a good acquisition, with plenty of potential under Codan's guidance.

Foolish takeaway

The market liked the news with the share price up by 6 cents to $1.45. Currently trading on a forecast P/E of 9.2, and paying a dividend yield of around 7 per cent, Codan looks interesting, and worthy of some further research.

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Motley Fool contributor Mike King doesn't own shares in Codan. The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Click here to be enlightened by The Motley Fool's disclosure policy.

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