The war which broke out in Israel last year is just one arena of geopolitical conflict worldwide in recent years. Prior to October 7 there was of course the start of the Russia-Ukraine war and in addition there are mounting concerns in East Asia over an ever-strengthening China. Consequently many countries are increasing their defense budgets and defense companies are benefitting from growing demand while developing solutions and products to meet changing needs. A survey of the defense sector recent conducted by analysts at investment bank Oppenheimer observed that geopolitical, technological and military changes worldwide are the most significant and rapid seen in the past 85 years.
Oppenheimer says that countries like China, Russia, Iran and North Korea are identifying opportunities to change the world order. The investment bank sees the change as structural and that if the US and its allies want to remain the dominant force in the world, they will be compelled to invest very large resources in technology to fortify their military advantage.
Israeli defense companies traded on the Tel Aviv Stock Exchange have been benefitting from this trend and the financial reports that they published in recent weeks revealed $1 billion in new contracts in Israel and abroad. Working in various sectors of the defense industry, some of these companies are enjoying a protracted boom in business.
Elbit Systems Ltd. (Nasdaq: ESLT; TASE:ESLT)
$930 million in new contracts
Elbit Systems is the biggest Israeli defense company traded on the TASE. The company develops and produces defense systems and weapons for use at sea, in the air and on land and has enjoyed record orders over the past year, including over the summer. At the end of July, Elbit reported a $190 million contract to supply Iron Sting precision guided mortar munitions to Israel's Ministry of Defense and subsequently reported a $340 million contract to supply ammunition to the Ministry of Defense. Contracts were signed with overseas customers: a $270 million deal to supply rocket artillery and a $130 million deal for Iron Fist defense systems to a European country.
Yet despite Elbit's unprecedented backlog of orders, the company's share price has risen negligibly this year due to pressure on investors to sell the stock from anti-Israeli organizations and relatively low cash flow that does not reflect the jump in orders. Elbit currently has a market cap of $9.1 billion.
Imagesat International (TASE: ISI)
$84.5 million in satellite and analysis services deals
The Yehud-based satellite services company has signed two huge contracts in recent weeks: the company announced that it will provide a customer in Asia with two satellites and related products and services, for $30 million over a three-year period. In July, the company reported a service contract worth $54.5 million in the field of analytics based on satellite intelligence. ImageSat's share price has risen 6.5% over the past year and it has a market cap of NIS 784 million.
Ashot Ashkelon Industries Ltd. (TASE:ASHO)
$23.5 million order to manufacture and supply components
Ashot manufactures jet engine shafts, transmissions, gears and gearboxes, landing gear components and tungsten products for the aerospace and defense industries including for armored vehicles and tanks like the Merkava and Namer. Founded in 1967, the company has 440 employees in Israel and the US and customers include major aircraft manufacturers.
In August, the company reported receiving new orders from the Ministry of Defense, for the production and supply of assemblies that include spare parts and system refurbishment worth NIS 86.4 million ($23.5 million according to the current exchange rate), for delivery over two years. The company has reported that the pace of new orders from the Ministry of Defense has increased significantly due to the war, including products that were not previously ordered from it. The war has boosted Ashot Ashkelon with its share price rising 101% over the past year, giving it a market cap of Nis 816 million.
Aryt industries (TASE: ARYT)
$218 million to supply fuzes
Aryt Industries, which is based in Sderot on the Gaza border has received large volume orders throughout the year and manufactures drones and military electronic products. In August, it received an order from the Ministry of Defense to supply NIS 80 million ($21.8 million according to the current exchange rate) worth of fuzes by 2025. The company that because of this and previous orders from the Ministry of Defense, it is expanding its production lines and workforce. Aryt is one of the best performing stocks over the past year on the TASE with a return of 134%, which has boosted its market cap to NIS 465 million.
IMCO Industries (TASE: IMCO)
$7 million contract for a subsidiary
IMCO has been one of the most outstanding stocks on the TASE over the past year with its share price skyrocketing $176%. The Haifa-region based company manufactures electronic, mechanical and electro-mechanical products for military use and is traded with a market cap of NIS 134 million. The company's US subsidiary recently received a new order worth $7 million to manufacture and supply components for a US defense company for delivery between 2025 and 2027.
Orbit Technologies (TASE: ORBI)
$6 million contract for satellite communications systems
Netanya based Orbit Technologies provides communication and audio management in airborne systems, and terminals for airborne and marine satellite communication. Last month Orbit announced $6 million in orders to supply satellite communications systems for new naval military platforms. The orders came from an integrator in Asia and will be delivered between 2025 and 2030. After a jump of 16.2% in its share price in the last year, Orbit is traded at a market cap of NIS 586 million.
PCB Technologies (TASE: PCBT)
$6 million contract for an Israeli customer
Two weeks ago PCB Technologies reported an order to supply printed circuits that will then be assembled as part of a security project for a customer in the defense industry in Israel. The contract is worth $5.6 million. This week the company announced a follow-up order worth $7.4 million for the supply of electronic equipment products and printed circuits for a defense project in Israel. With contracts reported totaling $49 million since the start of the year, PCB's share price has jumped almost 92% in the past year to give a market cap of NIS 398 million.
NextVision Stabilized Systems (TASE: NXSN)
$1.1 million for special stabilized cameras
The Ra'anana-based company develops and manufactures stabilized day and night cameras, which are mainly used for drones. Its solution helps to stabilize the image even in difficult flight conditions. The company's customers are in the defense sector, but it also has commercial customers. Among its customers are the Ministry of Defense, Elbit Systems and Israel Aerospace Industries. The company has announced over the past month an order worth $1.1 million for the purchase of cameras and other products for delivery this year. NextVision's share price has soared 114% over the last year, giving a market cap of NIS 3.8 billion.
Published by Globes, Israel business news - en.globes.co.il - on September 5, 2024.
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