Q: Canada will be buying 12 submarines either from Germany or South Korea. Quite a bit of their building/assembly will be done in Canada. Is there a role for Kraken to play in this? I don't know enough of Kraken's batteries but supposedly they are state of the art.
Could their batteries be used in the contract? How big would this be for the company? I raise the use of their batteries as a real possibility because Australia recently announced a $1.6B contract for new submarines and PNG stock rose significantly on the news because Kraken would likely supply batteries for the subs. Throw in the fact that Kraken is greatly increasing battery manufacturing capacity both in Germany and Nova Scotia and it all points to possibly very big things for the company. Finally, has the stock price gotten ahead of itself. It certainly has been on a tear.
Could their batteries be used in the contract? How big would this be for the company? I raise the use of their batteries as a real possibility because Australia recently announced a $1.6B contract for new submarines and PNG stock rose significantly on the news because Kraken would likely supply batteries for the subs. Throw in the fact that Kraken is greatly increasing battery manufacturing capacity both in Germany and Nova Scotia and it all points to possibly very big things for the company. Finally, has the stock price gotten ahead of itself. It certainly has been on a tear.
5i Research Answer:
The batteries tend to be catered more for drone systems vs submarines so we wouldn't expect PNG to have much of a role in these contracts but certainly a buildout in naval infrastructure would be a long-term net beenfit for a company like Kraken. The only other 'issue' here is that any material movement in submarine building in Canada will take years to build out, which is fine, but would take time to works its way through.
At 8X sales, it is not cheap, but top line revenue growth has been strong and analysts expect revenue to grow in the 30% to 40% range for the next few years, supported by tailwinds in marine defence and trends with drones.