Weekly Reports | 10:00 AM
In this week’s In Brief, brokers initiate coverage of two small caps in the defence and SaaS sectors, while Elders targets an earnings recovery in 2027
- Innovaero aims for defence drone growth amid rising geopolitical tensions
- Yojee challenges incumbent SaaS operators with new AI-ready freight forwarding software
- Elders targets FY27 earnings recovery as Delta synergies emerge
By Danielle Ecuyer
This week’s quote comes from Ryan Wells, Westpac.
"Employment fell 39.3k in September, well short of market and Westpac expectations for a 20k lift, leaving annual growth well below its historic average and below that of the working-age population."
"We expect the unemployment rate to peak at 4.8% in mid-2027, though there is upside risk to this forecast."
"The data complicate the RBA's 'a little tight' messaging, but with inflation the clear priority, we still expect a 25bp hike in November."
Heightened geopolitical tensions support Innovaero
Canaccord Genuity initiated coverage of Innovaero Technologies ((INN)), a small-cap, circa $150m sovereign Australian defence and aerospace company.
Innovaero is considered well positioned to capitalise on the structural shift towards uncrewed drone systems and affordable precision-strike capabilities.
Breaking down the product suite, OWL-B is the flagship offering, a circa 200km precision-strike munition which is at the centre of the Advanced Strategic Capabilities Accelerator (ASCA)’s $24m Mission Talon Strike development program.
OWL-B has received around $37m of ADF funding to date and is described as a loitering munition system for precision strikes over a 200km range, mostly against heavily armoured vehicles.
The technology has been developed, tested and qualified in its final or end-use form. The next phase is to prove it in real-world operational use.
Canaccord sees the completion of Mission Talon Strike, expected in 1H 2027, as a major hurdle to formal ADF procurement.
OWL-X is the next product, an extension of the OWL family, and is highlighted as an intermediate-range, over 150km, high-speed interceptor for use against Class III drones, manned helicopters and manned transport aircraft.
Management notes OWL-X prototypes were successfully flown in 2025 at altitudes of over 20,000 feet and maximum speeds of up to 740km/h.
The broker sees OWL-X as an important system because it diversifies Innovaero’s go-to-market strategy beyond one-way strikes into the high-priority counter-UAS market. There is potential for commercial contracts in 2028.
OWL-C is a longer-range (300–500km), fast-strike variant system for maritime and land-attack applications and is at an earlier stage of development. The aim is to combine the designs and systems of OWL-B and OWL-X into a new airframe.
Canaccord Genuity expects Innovaero’s planned Jandakot facility and manufacturing expansion to increase annual OWL production capacity tenfold to 2,500 units, potentially generating $338m in revenue at 30–35% gross margins.
The broker estimates every 1,000 units could generate $40m–$47m in gross profit and $27m–$34m in incremental EBIT, assuming a $15m fixed cost base.
Revenue is forecast to double to $34m in FY27 from $17m in FY26, before reaching around $115m in FY29, supported by OWL-B production increasing to 500 units in FY28 and 800 in FY29.
These forecasts remain below management’s performance hurdles of more than $100m in production contracts by December 2027 and revenue exceeding $150m by FY29.
Buy rated with a $1 target price.
Yojee takes on WiseTech Global
Moelis initiated coverage of Yojee ((YOJ)), which has developed an emerging software platform called Mosaic, targeting a share of the “lucrative” freight forwarding software market, currently dominated by WiseTech Global’s ((WTC)) CargoWise software.
The analyst estimates there is a circa US$1.5bn global market for freight forwarding software, pointing out Yojee’s management team has international and customs industry experience, as well as established relationships with Australian freight forwarders and transport customers.
A beta program for Mosaic started in September 2025, and the platform was launched on July 8, 2026.
Management is aiming to evolve Mosaic into an easy-to-use and fast-to-implement solution which focuses on higher-frequency transactions, the broker articulates.
Monthly cash burn is estimated by Moelis at around -$690k in 4Q26, with cash held at the time of $3.44m and no debt.
In August, a further circa $10.45m of new equity was raised, and Mosaic has also been successfully registered for Australian R&D tax incentives.
Rather than adapting legacy freight forwarding software, Mosaic has been designed from the ground up to simplify processes, improve the user experience and integrate with other systems, with an architecture built to accommodate AI capabilities and automation.
The stock has a circa $95m market capitalisation and is Buy rated with a 27c target price.
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