Electro Optic Systems Holdings Limited

ASX:EOS

Electro Optic Systems Holdings Limited

ASX:EOS
TradeAdd trade order Follow Unfollow Set Price Alert
$1.065 (-3.6%)
Last close price
#323
Rank
8
Held by
38
Followers
TradeAdd trade order Follow Unfollow Set Price Alert
Reports (9) My Report Forum Investors
Forum Topics EOS EOS News From Ukraine

Pinned straw:
neke86_
Added 6 months ago

Some confused Redditors on r/asx_bets have accidentally found some potentially meaningful news from Euromaidan press that quoted the Ukrainian deputy Minister of Defense as saying that EOS would be establishing domestic production in Ukraine. This possibly signifies that two contracts worth approximately A$180m that were conditional on several factors, including field trials, is going to get the green light for purchasing. Further to this, we know the Germans have been using EOS' Slinger to protect their donated anti-air assets, which means that trust them to some extent, as well as R150's to protect the smaller anti-air vehicles.

These are not the highest quality news sources, with UA MINDEF incentivized to over-inflate their military capability in news, and EOS incentivized to be part of that, however there are ground facts here that are reproducible in open source that I like, namely that the Germans are using this technology.

For my purposes I grade the quality of this information as C3: from a fairly reliable source and while I cannot confirm it all, it is logical in itself and agrees with other information sources available.

Discl. I hold EOS, but am not adding on this news.

  • https://euromaidanpress.com/2024/06/28/australian-arms-manufacturer-eos-plans-to-establish-production-in-ukraine/
  • https://biz.liga.net/en/all/all/novosti/no-one-kills-drones-like-eos-australian-weapons-maker-eos-eyes-production-in-ukraine
ciocan76
Added 2 months ago

https://eos-aus.com/news/the-critical-role-of-c-uas-in-the-russia-ukraine-conflict/

EOS is one of my best, having the characteristics that I personally looking for in a company: active in a market with an increased demand, new management, beaten down company that's recovering based on a change of strategy that delivers!

I'm 25% up, with a target of 100%.

9
jcmleng
Added 6 months ago

@neke86_ , thanks for flagging the links. I thought it did not quite make sense from a few angles:

(1) setting up shop in a warzone feels terribly counter-intuitive - the immediate risk is the West stops backing Ukraine, Putin steamrolls and takes over Ukraine, putting the facilities completely at risk. More so if Trump is talking about not backing Ukraine etc etc.

(3) I would imagine that Ukraine's technical workforce would be an issue - a lot of them would be russian-technology based, have been conscripted to go to war etc, both of which does not invite more investment.

(4) not sure Ukraine has much leverage to force that as a condition to the contract - it feels like they have taken whatever they can get in recent times anyway

(5) Andreas, the CEO is ex-Airbus, and there are lots of far safer places, and deep manufacturing technology skills in western Europe to set up shop, more so as the EU economy slows down further/plateaus and capacity becomes available.

(5) I would have expected an announcement given the risks to both the facility and the contract if it were really happening - EOS have really improved their stakeholder communication in the last 12-18M in my view,

So, didnt read much into the news nor act on it as it doesnt make logical sense, acknowledging that there could be many other factors at play.

I do not own DRO and do not follow it to be able to comment on the differences. But I do like that EOS has (what I think anyway), is a broader range of products beyond anti-drones.

I do think strongly, however, that EOS is in a very much more different and positive place today than the market gives it credit for. The turnaround under Andreas has well advanced. The management crew has completely changed. There is much more market and operational focus. Cash flow issues have mostly been resolved, debt has been repaid on time. And it is well placed with the offerings that it has amidst wartime demand.

In analysing this, I have not focused on the longer-term history (which I painfully went through buying in years ago at about ~$5-ish and holding through the troubles), as I think the company has made a step change away from the "troubles" such that making comparisons that far back are not helpful to working out the opportunity from here.

I have progressively topped up to average down my holdings in the past year as a result but am under no illusion that this is a medium-term wait at best. I suspect I am probably a wee bit early to what I am hoping is a part of some sort of party but the war thematic is too in my face to ignore right now. I am happy to be invested as I think the trajectory following the turnaround and Andreas' leadership makes EOS a very different beast from before. All will be revealed in the fullness of time!

Discl: Held IRL


11
edgescape
Added 6 months ago

Not that it appeals to me but it does seem war can be a very profitable investing thematic right now.

Still remember Raytheon stock rocketing whenever there was news of their cruise missiles being fired

12
Rocket6
Added 6 months ago

You have a knack of criticising/comparing to poor old Droneshield. I will try and keep you honest though (noting I am not too familiar with EOS)

Droneshield

  • Made a profit in FY24 – 9m. The year prior (FY23) they reported a small loss of 900k.
  • Market leaders in their industry.
  • Their balance sheet is a fortress, more than 50m in their pocket. There are no concerns about their short-medium term survival.
  • There is no debt.
  • In that time, their revenue has done this – significant yoy growth that exploded in 2023.

Electro Optic Systems Holdings

  • Loss After Abs: -33m. The year prior? -114m. Gulp.
  • I would suggest a good portion of the market wouldn't have the first clue what EOS do. Who will ever forget their attempt to make a space division? Double gulp!
  • Their balance sheet is an absolute binfire and has been mismanaged for years.
  • You mention their market cap, but fail to mention the percentage of debt relevant to their total market cap. Debt in this current environment scares the shit out of people and rightly so.
  • Historic revenues lumpy.

FWIW, I am not suggesting Droneshield's valuation makes sense. Are you a recent investor to EOS and is your thesis based on a turnaround?

9
ciocan76
Added 2 months ago

Management, space program, strategy... All have been corrected. Even the debt is paid (and looks like it will be) as planned, with no issues.

The company is recovering and that's more than enough for me and my strategy.

It will never be a major one in my portfolio but I really like what is currently doing and where is going!

9
jcmleng
Added 2 months ago

@ciocan76 , you are preaching to the absolutely converted in me! It was a dog in my portfolio, but as I have posted over the months, it is in a very different place now, with good things ahead. I am down some ~46% but at peak, was down ~80%, so the top ups in the past year (last one was last month when it dipped to $1.26), are paying off.

But am under no illusion this is a medium term holding as EOS needs to take time to let the sales and revenue occur, then deliver against the sales for the bottom line to further improve.

Good to know I am not alone here!

Discl: Held IRL

10
Aaronfzr
Added 2 months ago

Was and still is a dog in mine, I'm still down 65% despite recent gains. From here, I still need another 270% gain before I'll see my money again. Well done for those who got in at a better point in time, management and price, and I hope it continues to show returns for you!

As an aside, EOS, UCM and AC8 were speccy buys made on various whims years ago with virtually no research, and I put them in the bottom drawer expecting that if left alone for long enough one of them would probably come good. Next time I checked back in, AC8 is down >95% and de-listed for not paying ASX fees and UCM is down 90%, still grinding away. The lesson for me here is not leaving anything in the bottom drawer, and always being ready for a second look to check that the thesis isn't broken. The only positive from not checking in on them was that I wasn't tempted to average down from those highs as the prices fell.

12
ciocan76
Added 2 months ago

"From here, I still need another 270% gain before I'll see my money again."

I can't see any reason at the moment for that not to happen. In one of his interviews, the EOS CEO was talking about the current state off affairs the world is and was mentioning something on line with: " even the conflicts in Ukraine and middle east were to stop tomorrow, the change in paradigm regarding the needs of defence stocks was made - the countries will need to buy more and hold more and this change will have implications for many years". (That's an approximate extract)

11
SebastianG
Added 2 months ago

EOS is a dog for me, too.

Like @Aaronfzr I am down about 50%. Everything you've said in the above paragraph is true, but it held true when I bought the stock back in 2020 I think it was. Themetically EOS seemed a sensible play and even since then with wars breaking out all over the world, it has turned into a dog due to poor management. I continue to hold because it isn't a major holding in my portfolio and I figure the turnaround might eventually happen to get me back to where I was originally.

9