Analyst explains why Juno Industries is an interesting small cap

Paradigm Capital analyst Alexandra Ricci says Juno Industries (Juno Industries Stock Quote, Chart, News, Analysts, Financials TSXV:JUNO) offers investors a rare opportunity to gain exposure to Canada’s growing defence sector following the company’s debut on the TSX Venture Exchange.

In an Oct. 23 update, Ricci highlighted Juno’s public listing and its pipeline of potential military contracts. Paradigm does not currently rate the stock.

“Juno gives public investors a listed, pure-play way to participate in Canada’s Defence Industrial Strategy, which few Canadian small caps offer,” Ricci said. “The company is pre-revenue, so we view the stock as a pipeline and catalyst-driven story rather than an earnings-driven story.”

Juno began trading Oct. 22 under the symbol JUNO after completing its qualifying transaction with Trail Blazer Capital Corp. Shares closed their first trading session at $0.79, compared with the $0.80 subscription receipt price, giving the company a market capitalization of approximately $32.9-million and an enterprise value of $21-million.

“Juno gives public investors a listed, pure-play way to participate in Canada’s Defence Industrial Strategy, which few Canadian small caps offer,” Ricci said. “The company is pre-revenue, so we view the stock as a pipeline and catalyst-driven story rather than an earnings-driven story.”

Juno was founded by former federal defence minister Harjit Sajjan, who serves as executive chairman, and technology entrepreneur Hunter Scharfe, the company’s CEO. The company aims to become a Canadian defence contractor focused on developing technology in response to operational needs identified by military personnel.

Its flagship GUARDIAN system combines sensors, edge computing and artificial intelligence software to collect, process and integrate battlefield information. The platform includes Scout sensor nodes, Argus acoustic detection technology, Nexus edge computing hardware and LOGAN, an AI-enabled software platform designed to combine sensor data into a common operating picture.

Juno owns all the intellectual property associated with GUARDIAN.

Ricci said the company has four active proposals with Canada’s Department of National Defence and one with NATO, each involving existing GUARDIAN components. Juno is also a pre-qualified supplier in the Defence Investment Agency’s Defence Drone Initiative marketplace through July 2031.

Its technology addresses potential requirements under Canada’s Land Intelligence, Surveillance and Reconnaissance Modernization project, valued at between $1-billion and $4.99-billion, as well as counter-drone procurement initiatives.

Ricci argued that Juno’s next milestones will be important in demonstrating commercial demand for its technology. “The next milestones to watch are the first CAF/DND purchase order, non-dilutive funding wins and the first international contract,” she said.

Over the next 24 months, Juno is targeting its first Canadian Armed Forces or Department of National Defence purchase order, at least $4-million in non-dilutive funding and an initial international contract. The company also plans to recruit a chief technology officer and chief operating officer while pursuing acquisitions that could extend GUARDIAN’s capabilities into air, maritime and space applications.

Ricci said a $12-million financing completed in April at $0.80 per share provides funding for the company’s near-term plans.

The public listing represents the first catalyst identified in Paradigm’s September Hidden Compounders report, with future performance likely to depend on Juno’s ability to convert its procurement pipeline into contracts.

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