Petra Capital raises target

30 October Petra Capital raised the target for EOS from 6,89 to 7,07 dollar and reiterated it’s buy rating. EOS should put the report on their investor centre page. As they did before. Some highlights.

“Our analysis of EOS’s un-risked $13bn Defence sales pipeline provides an indicative roadmap for the future, and in doing so highlights the growth potential of the company’s core business. We have increased our medium-term sales forecasts to reflect this analysis, and ultimately our confidence in EOS’s ability to leverage its technological advantages to capitalise on increased defence spending. Our revised TP is $7.07ps (from $6.89ps), and our Buy rating is unchanged.”

The details and assumptions pertaining to each contract opportunity outlined above are as follows:

• UAE RWS. Accounts for the bulk of EOS’s current sales backlog, with Phase 1 (200 units at ~$900k each) currently being delivered, and Phase 2 (300 units at $900k each) expected to commence in mid-2021;
  
• ADF i RWS. Recently announced order for 251 RWS with a contracted value of $94m (~$370k per unit), for which product deliveries are expected to commence in 2H20 and complete in mid- 2021 (i.e. 6-9 month contract duration);
  
• ADFRWSLand400.WiththeLand400Phase3tenderingprocessnowdown-selectedtotwo, EOS looks certain to secure the RWS (R400S Mk 2) component of the supply contract (450 units at $670k each) given that both of the competing bids feature its single weapon station;
  
• ADF RWS ii (programme extension). Defence budget allocations and the recent ADF RWS contract (251 units) indicate that EOS will likely be contracted to retrofit its RWS to the balance (~1,000 units) of the ADF’s lightweight protected vehicles (namely Bushmaster and Hawkei);
  
• ADFLand400RWS(turret).InadditiontotheR400SMk2requirementthatisafeatureofthe design specification for both Rheinmetall (Lynx) and Hanwah’s (Redback) down-select, the latter also incorporates EOS’s T2000 turret (450 units at $2m each);
  
• CUASi(preferredsupplierstatus).Whiletheend-customerhasnotbeendisclosed,EOShas confirmed its down-select to preferred supplier of a “major international CUAS requirement” (i.e. ~150 units at $20m each), with an initial order (i.e. ~10 units) expected within the next 6 months;
  
• CUASii.InadditiontotheCUAScontractabove,EOShasthusfaralsoinitiateddiscussionwith four other prospective CUAS customers. Notwithstanding EOS’s estimated addressable market of ~$21bn over 10 years to 2030, we assume one additional tender (i.e. 75 units at $20m each);
  
• USOMFVRWS.TheOMFVisthereplacementprogrammefortheM-2BradleyIFV.Ofrelevance to EOS is the requirement for ‘lethality’ and ‘optionally manned capabilities’, and the intent to encourage foreign participation. We assume a ~30% share to EOS (10,000 units at $540k each);
  
• ROCV(ADF,US,EU).EOSrecentlysecureda$4mRWS(R400S)orderfromaEuropeanNATO country, some of which are optimised for Remotely Operated Combat Vehicles (ROCVs). EOS currently has a ROCV sales pipeline >$1bn, with major contract awards possible in <12 months.
  

Also from 30 October the recording of the special gala event to celebrate the unveiling of the very first complete R400 remote weapon station (RWS) produced at its Huntsville, Alabama high-tech facility. Check out the speech from CEO EOS Defence Systems Phil Coker about the R400. From 42:30 onwards. It’s intense...

Gala event