COTS Technology, which produces single board computers (SBCs) used in domestically produced weapons such as K2 tanks, is expected to raise funds by utilizing its company shares (treasury shares). Recently, as the defense industry has taken on a leading role in the domestic stock market, the rising share prices of component suppliers have reflected a "trickle-down effect," indicating it is an opportune time for financing through treasury shares.
According to industry sources on the 25th, COTS Technology is considering the issuance of exchangeable bonds (EB) that target its treasury shares. COTS Technology currently holds 14.05% of its own shares, and considering the recent share price of 25,000 won, the value of its treasury shares amounts to 18 billion won. The share price of COTS Technology has risen from around 15,000 won at the beginning of the year to 25,000 won recently. The continued enthusiasm for defense stocks has benefited small listed companies supplying products to major defense firms.
The company noted, "We are considering plans to utilize treasury shares to raise funds for the construction of a new research and development (R&D) center and factory, planned from this year to 2027." COTS Technology is pursuing facility investments to build an R&D center and a new factory in the Jangdae urban high-tech industrial complex in Yuseong District, Daejeon, with a total investment of 12.5 billion won over the next three years.
The company had a significant amount of treasury shares even before its listing on the KOSDAQ market in 2023. There were many inquiries from investors about how to utilize the treasury shares at the time of listing. CEO Jo Ji-won of COTS Technology said, "Rather than burning or distributing treasury shares, reinvesting them in business expansion is the direction many investors desire," adding, "Given our high backlog of orders, we will use this to secure talent and expand facility investments."
COTS Technology supplies products to major domestic defense companies such as LIG Nex1, Hyundai Rotem, and Hanwha Systems. The SBCs and computing devices and systems produced by the company are key equipment that enhance the performance and reliability of weapon systems, leading to higher operating profit margins than companies producing general components.
The company has also expanded its operations into the civilian sector. It is developing computers and systems applicable to railway signaling systems in collaboration with LS ELECTRIC and supplying control systems capable of resolving power supply imbalances to Korea Electric Power Corporation.
COTS Technology's performance has been steadily improving. Revenue increased from 42 billion won in 2022 to 65 billion won last year, and net profit surged from 2.3 billion won to 8.2 billion won during the same period.
COTS Technology is not the first company to utilize its own shares for financing, as defense companies are experiencing increased orders. Last month, SNT Holdings, the holding company of the SNT Group, and SNT Dynamics issued an EB targeting their own shares and shares of affiliates, raising a total of 200 billion won.