Ferrets Stock to Watch: ELECTRO OPTIC SYSTEMS LTD 08:48, Monday, 16 October 2006
A COMPANY THAT IS NEVER LOST IN SPACE COMMUNICATIONS
Sydney - Monday - October 16: (RWE Aust Business News) ******************************************************
Electro Optic Systems Holdings Ltd (ASX:EOS) shot up 23c to as high as $1.42 on Friday for no apparent reason.
Ferret expects the company to be the target of an ASX please explain in the light of the shares climbing from 81c to the current in just over a week.
Electro Optic last made an announcement to the market on October 3, noting that the US Air Force (USAF) had reported a budget for a space fence with $A780 million to be spent over six years.
In the last report, Electro Optic Systems said it had invested more than $55 million over the past decade developing the next generation of space sensors.
The USAF, for the first time, announced a budget estimate for what's known as a Space Fence - a program to upgrade the quantity and quality of information on objects in space.
This information is the basis for all military and commercial activities in space and the USAF is the agency responsible for providing all the US Government requirements.
The USA and its allies are now highly dependent on space for communication, surveillance, intelligence, navigation, weapons delivery and weapon placement.
The space environment presents both environmental and adversarial threats to defence assets, and these threats must be monitored.
The quality and quantity of space information available to the US and its allies does not meet emerging needs to maintain and protect key defence assets, and an upgrade of the capability of the USA and its allies is now underway.
EOS has recently completed a 10-year program for the development of space sensors that meet or exceed Space Fence requirements and which, additionally, embody a range of desirable operational features.
For example, the new EOS sensors are at least 10 times more sensitive and accurate than those presently in use.
In addition to EOS investment, US and Australian government agencies have funded programs for testing and qualifying EOS space surveillance sensors.
Demonstration programs such as Razor View and NEOT were conducted since 2004 by USAF in Australia with the co-operation of the Australian Department of Defence.
All of these programs have been successful.
Although the need for improved space information has been known for some time and the Space Fence program launched 15 months ago, the USAF has only recently released the first budget estimates for the Space Fence.
These USAF estimates provide $A780 million over six years from 2007. This initial funding estimate is for general purpose, ground-based sensors only, and includes neither airborne or space-based sensors, nor sensor requirements for missile defence and asset protection.
EOS estimates that total program requirements for all space sensors will exceed $3.5 billion over the next seven years.
In January of 2005 EOS entered into a strategic agreement with Northrop Grumman Space Technologies, an operating entity of Northrop Grumman Corporation, specifically focused on Space Fence and related applications.
Activity under this agreement continues to intensify with a focus on near-term operational deployments of EOS sensors.
Trials and demonstrations of the sensors and their inter-operability with existing space infrastructure continue at this time, and are meeting with success.
EOS believes that it is well-placed to participate in future procurements for the Space Fence and related programs.
In parallel developments, EOS is also negotiating directly with major commercial users of space for their access to space information obtained by the new EOS sensors.
These negotiations are moving towards completion in 2007, says chief executive Dr Ben Greene.
SHARE PRICE MOVEMENTS *********************
Shares of EOS closed 6c higher at $1.25 on Friday. Rolling high for the year has been $4 and low 60c. The company has 51.3 million shares on issue with a market cap of $64.1 million.
On August 31 the company reported a loss of $16.4 million for the half year to June, from revenue of of $21.8 million
Directors said a loss of $2.1 million from the space systems sector was extremely disappointing, and overshadowed improving performance in the military sector and stable results from space surveillance.
The military sector produced a loss of $6.1 million on the revenue of $17.8 million.
This sector now has strong contracts in hand for the second half, will show an improvement in both revenue and results.
But its long-term future lies in the military and space surveillance sectors performing satisfactorily.
These sectors have the potential to generate significant revenue in future periods.
BACKGROUND **********
EOS develops and produces products incorporating advanced electro-optic technologies for the aerospace market.
EOS products are developed through internal research and development programs based on EOS core technologies in software, lasers, electronics, optics, gimbals, telescopes and beam directors, optical coatings and precision mechanisms.
The company focuses on the space surveillance and control, and the military force protection sectors of the aerospace market.
In space surveillance and control, EOS specialises in space information based on the use of EOS-developed instruments and sensors to detect, track, classify and characterise objects in space. This information is required for both military and commercial space applications.
To support its space business, EOS develops and produces a wide range of space-related infrastructure in the form of sub-systems, such as telescopes and beam directors.
Some of these are sold commercially. An example is optical telescopes, where EOS is widely known as the largest producer of major optical telescopes in the world.
In 2005 EOS formed a strategic alliance with Northrop Grumman (USA) for the development and exploitation of certain segments of the space sector.
In the force protection sector, EOS develops and produces complete robotic or remotely-controlled weapon systems, based on existing weapons in customer inventory.
This market is addressed by EOS through a range of activities, as both prime and sub-contractor, and in partnership with other entities active in the sector.
The US Army CROWS program is a major program where EOS participates as a sub-contractor to Recon Optical Inc.
EOS operates research centres in Australia, the US and Germany, and has significant production facilities in Australia and the US.
New production facilities are expected to come online in Germany in 2007 to meet demand from both space and weapons sectors.
The EOS group of companies was founded in 1983 and became a publicly-listed company on the Australian Stock Exchange in 2002.
ENDS
EOS Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held