Below is my DD, is there anything I have missed?
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EOS - Electro Optic Systems.
BLUF: Small-cap Australian Defence contractor. 3 elements of the company: Defence, Space, and Communications. The defence side is the biggest and has several existing contracts with Aus Gov and several overseas countries with more in the works. They make remote weapon systems and counter-UAS (drone) systems. They have taken a big hit to the stock price due to contract/pipeline delays with customers, this delay is resolved and they are resuming delivery of systems.
Defence
“EOS Defence Systems specialises in technology for weapon systems optimisation and
integration, as well as ISR (Intelligence, Surveillance and Reconnaissance) for land
warfare. Its key products are next-generation remote weapon systems, vehicle turrets
and counter-UAS systems.”
Current contracts:
LAND400 Phase 2 (combat recon vehicle/ASLAV replacement): Remote weapon system (RWS) for the Block II 8x8 Boxer.
$100mil + Remote Weapon System contract with middle eastern country. Recently resumed after COVID delays.
$4.25mil contract with NATO country for RWS for remotely operated combat vehicle testing (small drone tank).
251 x RWS for Aus Gov, announced in July and being finalised
Potential Contracts:
LAND400 Phase 3 (infantry fighting vehicle/M113 replacement): partnered with Hanwa Defense for this tender (downselected to final two competitors). EOS supply the whole turret and RWS. (https://www.eos-aus.com/wp-content/uploads/2019/03/Turret-Launch-Brochure-WEB.pdf) Potentially a huge tailwind as the Army wants ~450 of these.
Recently released a new counter-UAS product. They are the preferred provider and in contract negotiations with an unknown customer. They are in discussions with four more. Pretty cool product that integrates several layers of defence into one useful system. First to do this on a big scale.
This sector may be in for a treat for a couple reasons. Defence spending is increasing by $270b over the next 10 years ($7b is for Space, this will become important later). Secondly, with the rise of china so too comes the risk of isolation. Reliance on the US/foreign industry is ideally avoided even more. By manufacturing as much as you can in Australia you aren’t only keeping the money here and increasing jobs, you are keeping the skills here too and reducing the vulnerability of your supply lines.
Communications/Space:
“EOS Space Systems specialises in applying EOS-developed optical sensors to detect, track, classify and characterise objects in space. This information has both military and commercial applications, including managing space assets to avoid collisions with space debris, missile defence and space control.”
This area makes less currently than the defence sector.
They have acquired two satellite communications companies.
The $7b we stashed away earlier, this is where is comes in. Australia has been late to the party with our space agency/military satellites. Without the US we are mostly blind looking north to see what’s up, and that’s not a place we want to be. EOS seems to be the only Aus company with the experience, money and resources to pursue this meaningfully. Although I am getting flashbacks to Sky and Space Global when i read though what they want to do.
Cons:
These government contracts, while lucrative and sometimes long term, take a long time to finalise. E.g. still waiting on Scotty from marketing from the July announcements for 251 remote weapon systems.
Some deliveries/payments have been delayed due to covid.
(20min delay)
