Mader Group And 2 Other Undiscovered Gems With Strong Potential
As the Australian market experiences a downturn, with the ASX 200 dropping 1.25% amid concerns over U.S. tariffs on Chinese goods impacting local commodities, investors are increasingly cautious about small-cap stocks. In this challenging environment, identifying undiscovered gems like Mader Group and others requires focusing on companies with robust fundamentals and resilience to broader economic pressures.
Name
Debt To Equity
Revenue Growth
Earnings Growth
Health Rating
Schaffer
25.47%
6.03%
-5.20%
★★★★★★
Sugar Terminals
NA
3.14%
3.53%
★★★★★★
Fiducian Group
NA
9.97%
7.85%
★★★★★★
Djerriwarrh Investments
1.14%
8.17%
7.54%
★★★★★★
Hearts and Minds Investments
NA
47.09%
49.82%
★★★★★★
Tribune Resources
NA
-21.42%
-41.85%
★★★★★★
Red Hill Minerals
NA
75.05%
36.74%
★★★★★★
Lycopodium
6.89%
16.56%
32.73%
★★★★★☆
Carlton Investments
0.02%
4.45%
3.97%
★★★★★☆
K&S
20.24%
1.58%
25.54%
★★★★☆☆
Click here to see the full list of 49 stocks from our ASX Undiscovered Gems With Strong Fundamentals screener.
Let's dive into some prime choices out of from the screener.
Simply Wall St Value Rating: ★★★★★★
Overview: Mader Group Limited is a contracting company that offers specialist technical services across the mining, energy, and industrial sectors both in Australia and internationally, with a market cap of approximately A$1.25 billion.
Operations: Mader Group derives its revenue primarily from staffing and outsourcing services, generating A$811.54 million. The company has a market cap of approximately A$1.25 billion.
Mader Group, a nimble player in the technical services industry, is making waves with its strategic expansion into energy and transport logistics. This move is expected to drive future growth, supported by a 15.5% earnings increase over the past year, outpacing the industry's 11.4%. The company's debt to equity ratio has impressively decreased from 84% to 23.5% over five years, underscoring financial prudence with interest payments well covered at 20.5x EBIT. Trading at A$6.26 per share and below fair value estimates by about 21%, Mader's focus on high-margin segments could enhance profitability despite potential geopolitical risks in North America impacting revenue streams.
Mader Group is expanding into new industry verticals for revenue growth. Click here to explore the full narrative on Mader Group's strategic initiatives.
Simply Wall St Value Rating: ★★★★★★
Overview: Pacific Current Group Limited operates a multi-boutique asset management business on a global scale, with a market capitalization of A$624.28 million.
Operations: Pacific Current Group generates revenue primarily through its multi-boutique asset management operations. The company's financial performance is reflected in its market capitalization of A$624.28 million.
Pacific Current Group, a player in the asset management sector, stands out with its impressive earnings growth of 3270% over the past year. Despite being debt-free and trading at a favorable price-to-earnings ratio of 3.1x compared to the broader Australian market's 17.8x, its reliance on asset sales for cash flow introduces potential volatility in revenue streams. Recent results highlight this concern as net income surged to A$100 million from A$11.66 million last year, yet future earnings are forecasted to decline by an average of 78% annually over three years, indicating caution for prospective investors.
Pacific Current Group's reliance on non-repeatable asset sales may lead to volatile revenue. Click here to explore the full narrative on Pacific Current Group.
Simply Wall St Value Rating: ★★★★★☆
Overview: Qualitas is a real estate investment firm specializing in direct investments, distressed debt restructuring, third-party capital raisings, and consulting services, with a market cap of A$851.03 million.
Operations: Qualitas generates revenue primarily through its Direct Lending and Funds Management segments, with A$23.03 million and A$21.46 million respectively. The company's net profit margin is a key financial metric to consider when evaluating its profitability within the real estate investment sector.
Qualitas, a real estate investment firm, has demonstrated strong financial performance with its earnings growing by 23.5% over the past year, surpassing industry benchmarks. The company boasts a robust balance sheet with more cash than total debt and has significantly reduced its debt to equity ratio from 1014.3% to 10.7% in five years. However, free cash flow remains negative despite record capital raising of A$2.8 billion and deployment of A$4.2 billion, which could drive future revenue growth through increased fee-earning funds under management. Recent half-year results showed revenue at A$50 million and net income at A$16 million compared to the previous year's figures of A$42 million and A$13 million respectively, reflecting improved profitability amidst market challenges related to interest rate fluctuations and residential sector dependency.
Qualitas' focus on balance sheet efficiency and larger private credit deployments may enhance profit margins significantly. Click here to explore the detailed narrative on Qualitas' strategic initiatives and market positioning.
Click here to access our complete index of 49 ASX Undiscovered Gems With Strong Fundamentals.
Are you invested in these stocks already? Keep abreast of every twist and turn by setting up a portfolio with Simply Wall St, where we make it simple for investors like you to stay informed and proactive.
Take control of your financial future using Simply Wall St, offering free, in-depth knowledge of international markets to every investor.
Explore high-performing small cap companies that haven't yet garnered significant analyst attention.
Fuel your portfolio with companies showing strong growth potential, backed by optimistic outlooks both from analysts and management.
Find companies with promising cash flow potential yet trading below their fair value.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include ASX:MAD ASX:PAC and ASX:QAL.
Have feedback on this article? Concerned about the content? with us directly. Alternatively, email editorial-team@simplywallst.com

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
22 minutes ago
- Yahoo
E-2 Hawkeye Replaces USAF E-3 Sentry, E-7 Cancelled In New Budget
A seismic shift has occurred in the Trump administration's new defense spending plan that is just emerging when it comes to the USAF's airborne early warning and control (AEW&C) predicament. The service's E-3 Sentry Airborne Warning and Control System (AWACS) aircraft are dwindling in number and rapidly aging into unsupportability. The proven and in-production E-7 Wedgetail, based on the Boeing 737 and serving with multiple allies, was supposed to bridge the gap between the E-3's retirement and pushing the sending part of the mission to space-based distributed satellite constellations. You can read all about this here. Now, if the administration gets its wish, that won't happen. The E-7 will be cancelled and the E-2D Hawkeye, currently flown by the U.S. Navy, will step in to fill the gap. This major turn of events came to light today as Secretary of Defense Pete Hegseth, Chairman of the Joint Chiefs of Staff U.S. Air Force Gen. John Caine, and Bryn Woollacott MacDonnell testified before the Senate Appropriations Committee. MacDonnell is Special Assistant to the Secretary of Defense and is currently performing the duties of the Under Secretary of Defense (Comptroller) and the Pentagon's Chief Financial Officer. In 2023, the USAF announced its intention to purchase E-7s, potentially as many as 26 of them, as replacements for a portion of the E-3 fleet. At the hearing today, the question of the current future of the USAF AEW&C force came from Sen. Lisa Murkowski late in the hearing. Murkowski is a Republican from Alaska, where fighters, tankers, and E-3 Sentry jets launch regularly to intercept foreign planes, primarily Russian fighters, bombers, and surveillance aircraft, over the vast arctic wilderness. Chinese H-6 missile carrier aircraft also appeared off Alaska last year for the first time, as part of a joint mission with Russia. Chinese air and naval presence in the region is only expected to grow in the future. China and Russia conduct joint air strategic patrol over Bering Sea on July 25. This marks the eighth air strategic patrol organized by the two militaries since from China PLA Air Force Weibo accounthttps:// — Ryan Chan 陳家翹 (@ryankakiuchan) July 25, 2024 With this in mind, just how big of an issue the age of the E-3 fleet has become was central to Murkowski's question. 'I have been concerned. We have E-3 capability up north, of course, but we were all counting on the E-7 Wedgetail coming our way. We're kind of limping along up north right now, which is unfortunate. And the budget proposes terminating the program. Again, the E-3 fleet [is] barely operational now, and I understand the intent to shift towards the space-based – you call it the 'air moving target indicators' – but my concern is that you've got a situation where you're not going to be able to use more duct tape to hold things together until you put this system in place. And, so, how we maintain that level of operational readiness and coverage, I'm not sure how you make it.' 'You know, the E-3 and the E-3 community have been really important to us for a long, long time, and I'll defer to the Comptroller, but I you know the Department has a bridging strategy through investing in some additional airborne platforms in order to gap fill while the space-based capabilities come online,' Kane replied in response to the senator's question. This is where the E-2D comes in. MacDonnell then added, 'Ma'am, we do have in the budget $150 million in FY26 [Fiscal Year 2026] for a joint expeditionary E-2D unit with five dedicated E-2Ds, and the budget also funds for additional E-2Ds to fill the near-term gap at $1.4 billion.' Currently, the only branch of the U.S. military that operates the E-2D is the U.S. Navy. The Alaskan senator then inquired, 'Can you tell me, will that have implications for what we're seeing up north in Alaska?' 'The answer is yes. I would. I would file this entire discussion under difficult choices that we have to make. But you know, the E-7, in particular, is sort of late, more expensive and 'gold plated,' and so filling the gap, and then shifting to space-based ISR [intelligence, surveillance, and reconnaissance] is a portion of how we think we can do it best, considering all the challenges,' Hegseth responded. At a separate hearing before the House Appropriations Committee yesterday, Hegsteth had also described the Wedgetail as an example of a capability that is 'not survivable in the modern battlefield' and mentioned broad plans 'to fund existing platforms that are there more robustly and make sure they're modernized.' An annual assessment of high-profile U.S. military procurement programs from the Government Accountability Office (GAO), a Congressional watchdog, which was released today, offers additional insight into issues with the USAF's effort to acquire E-7s. The original plan was to acquire a pair of production representative prototype (or RP) aircraft ahead of production of examples in a finalized configuration, starting this year. The service had then expected to reach initial operational capability with the Wedgetail in 2027. 'Air Force officials said that they now plan to begin production by the second quarter of fiscal year 2026 before completing the E-7A RP MTA [Middle Tier Acquisition] rapid prototyping effort by initiating a separate, concurrent program on the major capability acquisition pathway,' according to GAO. 'They said that it was necessary to begin production concurrently with the E-7A RP rapid prototyping effort to offset the lead time associated with the build and subsequent modification of the aircraft.' 'The program definitized its contract with Boeing since our last assessment. After the contract was definitized, Boeing delayed the first flight test by 9 months to May 2027,' the report adds. 'According to Air Force officials, the delay was due to a late-breaking, required critical security architecture change that affected the procurement of parts, qualification testing, and modification of the airframe.' 'The program stated that the Air Force definitized the MTA rapid prototyping effort contract in August 2024 to deliver two operationally capable E-7A prototype aircraft in fiscal year 2028,' GAO's new assessment further notes. 'The program added that the total acquisition cost increase of 33 percent resulted from updated methodologies to include additional scope related to non-recurring engineering, with the primary drivers being software and air vehicle subsystems.' Last year, the Air Force had been very open about the difficulties it was having finalizing a contract with Boeing for the RP jets. The two parties ended up agreeing on a deal valued at nearly $2.6 billion. A contracting notice the service put out earlier this year also pointed to significant expected differences between the RP aircraft and the full production examples, including the possibility of a new radar. Existing versions of the E-7 in service elsewhere globally today are equipped with Northrop Grumman's Multi-Role Electronically Scanned Array (MESA) radar. The USAF's move to drop the E-7 and leverage the E-2D, which is already in the Pentagon's stable, prompts many questions. For instance, just how many of these aircraft will the USAF end up with? As of 2024, the USAF's E-3 fleet stood at 16 aircraft. Above all else, there are major capability trades here. The Hawkeye is a much smaller aircraft than both the Sentry and the Wedgetail. It is extremely capable, but it is also optimized to exist within the confines of carrier operations. The crew size is just five individuals. This limits the amount of shear manpower to perform highly complex operations and other tasks beyond traditional AEW&C. The E-2 also has less range and is far slower than both the E-3 and E-7. This means longer transit times, and the aircraft doesn't fit in as seamlessly with the jet-centric operations for the counter-air mission the service currently enjoys. The E-2D's AN/APY-9 radar from Lockheed Martin is hugely capable, but many of its other advanced data fusion and relay systems are unique to the Navy. These systems would either be stripped or just left unused for USAF-focused operations. It's also possible that other systems will replace them, but this will cost money and take time to integrate and field. Hawkeyes, being turboprop aircraft, also operate at lower altitudes, giving their radar, radio systems, and electronic surveillance suites reduced line-of-sight, limiting their range and fidelity at distance for some targets and surveillance application, in some cases. Then there is the aerial refueling issue. The E-2D has gained this ability relatively recently, which expands its endurance. Typical missions can now last over seven hours. However, the aircraft uses the Navy-preferred probe-and-drogue refueling method, not the boom and receptacle one favored by the USAF. The USAF's KC-46 tankers do have a hose and drogue system and some of the service's KC-135Rs have podded hose and drogue systems. Otherwise, they require a basket attachment to their boom, often called the 'Iron Maiden' or 'Wrecking Ball,' due to its rigid metal frame and potential to smack into and damage airframes. This system makes the KC-135R useless for refueling receptacle-equipped aircraft when it is fitted. The E-2D also refuels lower-and-slower than jet aircraft. All these issues are not 'show-stoppers,' but they are ones that will impact operational planning and flexibility. The E-2D, being already a highly upgraded and a much smaller airframe, also lacks the same capacity for future expansion compared to the E-7. This could include adding more personnel for various non-traditional functions, including using its advanced radar to scan the surface more extensively or for unique battle management needs, such as controlling future drone swarms, or even for more extensive passive intelligence collection and exploitation and data fusion operations. High-bandwidth datalinks can possibly make up for some of the manpower differentials, allowing folks on the ground to execute critical functions in near real time as part of a distributed crew arrangement, but there are downfalls to this concept, as well. On the other hand, having commonality with the Navy's AEW&C aircraft should help reduce costs for both services and accelerate the type's entry into USAF service. It could also benefit the future evolution of the E-2D as more money will be flowing into the program. It's also a very capable and well-proven platform, lowering risk. Above all else, joint service E-2Ds could be absolutely critical to the USAF's Agile Combat Employment (ACE) combat doctrine that will see its forces distributed to remote forward locales and constantly in motion. The E-2D's turboprop performance, robust landing gear, and arrested landing capabilities mean it can be pushed far forward to very austere operating locations with limited runway length. And it can do this without sacrificing the quality of the data it collects or the efficacy of its use as a battle manager. This is something a 707 or 737 platform simply cannot match and could prove decisive in a major peer-state contingency. TWZ highlighted these exact benefits after U.S. Central Command (CENTCOM) released a video last year showing a Navy Hawkeye refueling from a USAF HC-130J Combat King II combat search and rescue aircraft, which can act as a probe-and-drogue tanker, primarily for helicopters and Osprey tiltrotors. A @USNavy E-2D refuels inflight from an @usairforce HC-130 over the U.S. Central Command area of responsibility. — U.S. Central Command (@CENTCOM) August 6, 2024 While the USAF's move away from the E-7 is certainly surprising, and it will result in shortfalls in some areas, it also unlocks new capabilities, some of which are arguably more applicable to tomorrow's wars. It also buys down additional risk, which is looming very large as it isn't clear at this time, at least publicly, how far along the Pentagon's persistent space-based aircraft sensing constellation development actually is. All of this still has to make it through congressional approval, which could be a challenge considering the special interests involved. But as it sits now, the flying service is pivoting big once again when it comes to its increasingly dire AEW&C needs. Contact the author: Tyler@
Yahoo
22 minutes ago
- Yahoo
Why Trump Is Losing His Trade War
The Atlantic Daily, a newsletter that guides you through the biggest stories of the day, helps you discover new ideas, and recommends the best in culture. Sign up for it here. Donald Trump's trade war is fast turning into a fiasco. When the president started the war, Team Trump advertised it as certain to be fast, easy, and cheap. Trump would impose tariffs. The world would yield to his will. The tariffs would do everything at once. They would protect U.S. industry from foreign competition without raising prices, and generate vast revenues that would finance other tax cuts. Americans could eat their cake, continue to have the cake, and trade the same cake for pie—all at the same time. 'There's not going to be any pain for American workers,' Trump's press secretary, Karoline Leavitt, vowed in April. The advertising rapidly proved false. The U.S. economy is slowing because of the Trump tariffs; China's is thriving in spite of them. Team Trump falsely promotes vague five-page outlines with alienated former allies as big deals; China is successfully wooing some of its former rivals, such as Vietnam. America's standing in the world is measurably sinking; China's is measurably rising. Courts are ruling that Trump's tariffs are illegal; public opinion mistrusts the tariffs, regarding them as expensive and unproductive. The promise of huge flows of painless money from tariff revenues is evanescing as the fantasy it always was. Oh, and the country's largest chain of Halloween retailers canceled its traditional summer grand opening because of Trump-caused supply disruptions. What comes next, as things go wrong? Trump's first instinct is to blame the targets of his economic aggression for not cooperating with his wishes. On May 30, Trump accused China of violating an imaginary agreement with him. On June 4, he complained that Xi Jinping was 'extremely hard to make a deal with.' But Trump seldom chooses to quarrel with foreign dictators, saying in the same breath, 'I like President Xi of China, always have, and always will.' Today, in all-caps emphasis, Trump announced that a deal had been done, declaring that his 'RELATIONSHIP IS EXCELLENT' with the Chinese president-for-life. The lack of details in the announcement strongly suggests that Trump yielded more and gained less than his publicity apparatus wants Americans to believe. That's because, in reality, Trump's global trade war has always been subordinate to his domestic culture war. Trump much prefers to vent his rage against enemies within. Get ready for him to blame the failure of his trade war on fellow Americans who did not support him enough. The Trump tariffs will be ballyhooed as an act of patriotism, a necessary sacrifice to be laid on the altar of the nation. One of Trump's television talkers reminded viewers that Americans melted down their pots and pans to win the Second World War. If the president needs to ration dolls and colored pencils, how dare any true American raise a contrary voice? The coming call for national solidarity with Trump's Great Patriotic War against imported Halloween costumes deserves all the scoffing it will get and more. Trump ordered the nation into economic warfare. He did not do any of the things necessary to create any hope of success in that war. The impending defeat is his personal doing, entirely his own fault. [Jonathan Chait: The good news about Trump's tariffs] Recall the classic Norm Macdonald bit in which the comedian marvels that in the 20th century, Germany decided to go to war with 'the world,' twice. That was meant as a joke. Trump adopted it as his actual strategy. Trump's rationalizers invoke anxiety about China as his justification. Yes, China numbered among the targets of Trump's 'Liberation Day' tariffs. But so did Australia. So did Brazil. So did Canada. So did Denmark. So did Egypt. And on and on, through the whole alphabet of American allies and trading partners. The United States is by far the planet's strongest national economy, producing slightly more than one-quarter of the planet's goods and services. Including its historic and recent partners, the United States could potentially lead a group of nations sufficiently influential to write economic rules that everybody would need to take into account. That fact underpinned the Trans-Pacific Partnership concept of the Obama years: Form a large-enough and attractive-enough club, and China will have no choice but to comply with the founding members' terms. Trump's alternative concept is for a quarter of the world economy to cut itself off from the other three-quarters, and then wait for the three-quarters to beg for mercy from the one-quarter. Unsurprisingly, that concept is fast proving a stinker. But suppose the president sincerely believed that the U.S. had no choice: The one-quarter must fight the three-quarters as a matter of national survival, or 'liberation,' from the tyranny of foreign goods and services, foreign fruits and vegetables. Crazy, but suppose he did. What would follow? A rational president would grasp that a U.S. economic war against the rest of the world would be a big, protracted, and painful undertaking. Such an enormous commitment would require democratic consent from a large majority of the public, all the more so because the United States is starting the war itself. Trump's trade conflict is very much a war of choice. The president must explain why he chose it. A rational president determined to fight an economic war would try to mobilize broad support from the public and from Congress. He would seek allies in Congress, and not only from his own party. He might, for example, compromise on some of his other goals. If he also wanted to tighten immigration at the same time as waging a global trade war, or to roll back DEI programs, or to cut taxes for the wealthy, or to relax anti-corruption measures, or to pardon the crimes of his violent supporters, or to plan any other ambitious but divisive project, he might think twice about pursuing them. You can't ask your opponents to pay more and do without if you won't forgo even a scrap of your partisan agenda. You can ask anyway, but don't be shocked when they answer with a Bronx cheer. That president would also lead from the front. A president seeking to inspire Americans to endure hardship for the greater good would certainly not throw himself a multimillion-dollar birthday parade at public expense. He would not accept lavish gifts from foreign governments, would not operate a pay-for-access business that collected billions of dollars for himself and his family from undisclosed favor-seekers. While asking other Americans to accept less, he would not brazenly help himself to more. He certainly would not troll, insult, and demean those who may not have voted for him, but whose cooperation he needs now. This president has, of course, done the most egregious version of every item above. His economic war is adjunct to his partisan culture war. He did not seek broad support. He gleefully offends and alienates everyone outside his base. Which works for him as long as times are prosperous, as they were in the first three years of his first administration. Allow things to get tough, though, and it's a different story. Trump cannot ask for patience and trust, because at least half the country has unalterably judged him as untrustworthy and out only for himself. [David Frum: The ultimate bait and switch of Trump's tariffs] Trump bet his presidency on the theory that trade wars are 'good and easy to win,' as he posted during his first term. His second-term trade war, however, is proving not so easy, and not so good, either. He is fighting it alone, without global allies or domestic consent, because that's his nature. It's now also his problem. In the 1983 movie WarGames, a computer thinks its way through dozens of terrifying nuclear scenarios and concludes: 'The only winning move is not to play.' In other words, the only safe way to conduct a nuclear exchange is never to have one. The same could be said of trade wars, at least when fought by one nation, however big and rich, against all the others, all at once. Trump decided he did not care about Americans' support for his economic war. He did not ask for their backing. He did not make any effort to win it. He willfully alienated at least half of the public. Now that he's losing, his supporters want to scold the country because it rejects the whole misbegotten project as stupid and doomed. Don't listen to their reproaches. This is Trump's war, and his alone. The only way to win now is to end Trump's trade war as rapidly as possible. And then end the excessive, unilateral trade powers of a corrupt president who blundered into a pointless and doomed conflict without justification, plan, or consent. Article originally published at The Atlantic
Yahoo
22 minutes ago
- Yahoo
Pentagon to review AUKUS submarine deal with Australia and Britain
The Pentagon is reviewing the AUKUS agreement on sharing nuclear-powered submarine technology with Australia and the United Kingdom — a decision immediately condemned by congressional Democrats and one that may cause angst among U.S. allies. 'The Department is reviewing AUKUS as part of ensuring that this initiative of the previous Administration is aligned with the President's America First agenda,' a Pentagon spokesperson wrote in a statement Wednesday. The spokesperson did not say who was involved in the effort, when it would conclude or why it was initiated — except to say that the Pentagon was concerned about the readiness of its forces and the U.S. defense industry. 'This review will ensure the initiative meets these common sense, America First criteria,' the statement continued. AUKUS countries update rules on sharing defense kit The Financial Times first reported news of the review. As part of the trilateral defense pact, Britain and Australia will build a nuclear-powered submarine, with the United States selling Virginia-class boats to Canberra in the interim. The agreement also includes a separate goal for the three countries to develop advanced technology together, such as quantum computing and hypersonic missiles. U.S. Defense Secretary Pete Hegseth traveled to Singapore just over a week ago, where he met with his Australian counterpart, Richard Marles, multiple times. In a major speech on the Trump administration's Asia policy, Hegseth didn't mention AUKUS, something Marles dismissed in an interview with Defense News later. 'We've spoken extensively about AUKUS — both of our countries, including Secretary Hegseth himself. We don't feel a need to keep reiterating it on every single occasion,' Marles said, arguing the program was 'on track.' In his March confirmation hearing, Pentagon head of policy Elbridge Colby expressed some hesitancy about AUKUS — in particular, America's difficulty increasing its own production of nuclear-powered submarines, which would conceivably make it harder to sell extra boats to Australia. 'If we can produce the attack submarines in sufficient number and sufficient speed, then great. But if we can't, that becomes a very difficult problem because we don't want our servicemen and women to be in a weaker position,' Colby said. 'It should be the policy of the United States government to do everything we can to make this work,' Colby continued. Colby has also argued that Australia, which is increasing defense spending to around 2.4% of GDP by the mid-2030s, should raise its defense budget far faster. In a Pentagon readout after Hegseth and Marles met, the U.S. said it wanted that number to be 3.5% of GDP. In April, the head of U.S. Indo-Pacific Command, Adm. Samuel Paparo, defended the initiative's value in testimony before the House and said the effort on nuclear submarines was 'meeting every milestone' operationally. 'AUKUS delivers something to INDOPACOM that is critical and could be a key advantage, and that is a Indian Ocean submarine base. This gives us faster response time to the South China Sea than in Hawaii, in Washington, in San Diego,' Paparo said. To help America build more submarines, Congress has spent billions of dollars in recent defense bills targeted at the effort. Australia, too, has pledged $3 billion in its own funding to help the U.S. build more of the boats, which Marles referenced in his interview with Defense News. 'It is a challenge, but I think it's a challenge we can meet,' he said. The Australian embassy didn't immediately respond to a request for comment. A spokesperson for the British embassy, meanwhile, responded to the news with reassurance. 'It is understandable that a new administration would want to review its approach to such a major partnership, just as the U.K. did last year.' Senate Democrats criticized the White House for casting doubt on the future of the AUKUS agreement. 'If this administration is serious about countering the threat from China — like it has said as recently as this morning — then it will work expeditiously with our partners in Australia and the U.K. to strengthen this agreement and ensure we are taking steps to further boost our submarine industrial base,' Sen. Tim Kaine, D-Va., said in a statement. 'Anything less would play directly into China's hand.' Fellow Senate Armed Services Committee member Jeanne Shaheen, D-N.H., said the news that Trump may abandon AUKUS 'will be met with cheers in Beijing' and further weaken America's standing in the world. 'At a moment when we face mounting threats from [China] and Russia, we should be encouraging our partners to raise their defense spending and partnering with them on the latest technologies — not doing the opposite,' she said. Military Times reporter Leo Shane III contributed to this story.