The perception is that EOS cash is not sufficient to fund growth and there being ever present need to tap the capital markets to fund inventory expansion, and the risk that the products manufactured for the UAE contract and recognised as revenue already in the accounts will not be converted into cash which calls into question accounting methodology.
Cash conversion on the UAE contract is already happening. $30m received last quarter and $65m in total from customers. $51m in cash sitting in the bank account at 30 June. I cant see how its dubious accounting policy to recognise revenue on goods that are ready to ship and otherwise in line with the contract schedule but having this little thing called Covid shut down all avenues to actually get the product offshore. To suggest that the UAE government is at risk of bankruptcy and not accepting the product or having the means to pay is ridiculous.
Its up to EOS to update the market however as cash conversion happens. They have said they expect $100m in cash from the UAE by year end. Hopefully more news on cash conversion and product acceptance in the 1H Results due 30/8.
Finally concerns raised about the business acumen of the Board. Interesting to see who is appointed but hopefully someone with some business pedigree. Fred Bart leaving I think is going to be seen as positive.
Spacelink funding will also be a key catalyst as it 1) alleviates market risk of a further cap raise to fund and 2) will provide a benchmark for a valuation to the Spacelink business opportunity.
Further contract awards and wins in 2H 2021, and with $100m sitting in the bank to fund the next stage of product expansion, should be a resounding answer to the shorters.
EOS Price at posting:
$4.12 Sentiment: Buy Disclosure: Held
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)