Exploding Sales?

12/08/2006 12:00 am EST

Focus:

Gregory Spear

Editor and President, The Spear Report

Casting an opportunist's eye over recent federal legislation, defense expert Gregory Spear finds a company that is in the catbird seat to potentially reap huge rewards from our country's homeland security and terrorist prevention programs.

"We are recommending the repurchase of American Science and Engineering(ASEI NASDAQ GM), an explosive detection company. We are adding ASEI to the A-List after noting a tone of impatience and reprimand in the Congress' language in the DHS Appropriations bill. For example, the bill exhorts the DHS Secretary to submit a report that 'Describes the progress to address financial management deficiencies, improve its management controls, and implement performance measures and evaluations.'

"This includes: 'Submitting a detailed expenditure plan for explosive detection systems refurbishment, procurement, and installations on an airport-by-airport basis for fiscal year 2007.'

"We sense that Congress wants the DHS and TSA to get more serious about the business of homeland security and particularly air travel protection. This is long overdue and the money is there: 'Provided, that of the total amount made available under this heading, not to exceed $3,768,266,000 shall be for screening operations, of which $141,400,000 shall be available only for procurement of checked baggage explosive detection systems and $138,000,000 shall be available only for installation of checked baggage explosive detection systems'.

"That's $279 million for explosive detection; and we expect ASEI to get its share. The bill also appropriates generously ($178,000,000) for the detection of radiological threats ASEI was recently awarded the initial development phase contract for a system to detect nuclear threats. We expect the company will get the go-ahead to build and deploy it.

"The act is also requiring the DHS to: 'Submit a comprehensive port, container, and cargo security strategic plan to the Committees on Appropriations of the Senate and the House of Representatives that requires screening all inbound cargo, doubles the percentage of inbound cargo currently inspected, sets minimum standards for securing inbound cargo, and includes the fiscal year 2007 performance requirements for port, container, and cargo security as specified in the joint explanatory statement accompanying this Act.'

"Coincidently, ASEI recently announced the launch of its second-generation drive-through cargo and vehicle-screening system with multi-view Z-Backscatter imaging that can detect stowaways, explosives, and other contraband in cars, vans, and trucks. The system is the only system available that can produce images from all three sides of the object under examination--left, right, and top-down. Z- Backscatter images show organic materials such as explosives, plastic weapons and, drugs. On September 26th the company announced its first sale to a key government agency. We think there will be more to come."

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