One ASX defence stock is trying to upstage the high-flying DroneShield Ltd (ASX: DRO) on Tuesday.
That stock is Electro Optic Systems Holdings Ltd (ASX: EOS), which comprises two divisions. These are Defence Systems and Space Systems.
The Defence Systems division specialises in technology for weapon systems optimisation and integration, as well as ISR (Intelligence, Surveillance and Reconnaissance) and C4 systems for land warfare. Its key products include next-generation remote weapon systems, vehicle turrets, and high-energy laser weapons (directed energy).
Whereas the Space Systems division includes its Space Technologies and EM Solutions businesses. These are businesses specialising in applying optical sensors and effectors to detect, track and characterise objects in space, as well as delivering RF and optical space communications technology.
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Why is this ASX defence stock rocketing?
Investors have been bidding the Electro Optic Systems share price 10% higher to $1.79 this morning following the release of the company's half year sales update.
According to the release, the company achieved unaudited first half revenue of approximately $142.6 million. This is an increase of 92% on the $74.3 million that it recorded in the prior corresponding period.
However, management has warned that investors should not necessarily expect similar growth in the second half. It explains that "[g]iven the lumpy nature of EOS revenue, quarterly figures should not be used to imply full year estimates."
Management advised that its strong first half revenue performance was driven by growth across all of its businesses. This includes the impact of accelerating production and delivery of remote weapons systems under an existing contract with a customer in the Middle East, growth in the EM Solutions business, and growth in the Space Technologies business.
At the end of the period, the ASX defence stock had an unaudited cash balance of $52.2 million. While this is down from a cash balance of $72.4 million at the end of March, it includes the previously announced repayment of $20.5 million of debt during the month of April.
A further debt repayment of $52.1 million is due in October 2025. This gives the company over a year to build its cash position and make its repayment. Speaking of which, management has not included any cash flow information with this update. However, this will be released to the market before the end of the month.
Following today's gain, this ASX defence stock is now up over 70% since the start of the year.
