Electro Optic Systems Holdings Ltd (ASX: EOS) shares are having a very strong start to the week.
In morning trade, the ASX All Ords stock is up 12% to $1.19.
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Why is this ASX All Ords stock leaping?
Investors have been scrambling to buy the defence systems and space systems company's shares following the release of an announcement.
According to the release, EOS has recently secured new orders amounting to approximately $33.7 million.
It notes that it has received an order for Counter-Drone Container Based Remote Weapon Systems (CBRWS) from a new Western European customer valued at 8.2 million euros (approximately $13.6 million).
The company advised that the CBRWS will be integrated with a 70mm long-range counter-drone rocket system. These systems are expected to be delivered during 2025.
In addition, EOS Singapore has received orders for remote weapon system spares worth SGD17.1 million (approximately $20.1 million).
The ASX All Ords stock notes that the orders are expected to be delivered during 2025 and 2026.
Management believes that these orders demonstrate the benefits of EOS' strategic focus on diversifying its remote weapon system product range and customer base in recent years. EOS' key focus in the coming months will continue to be the development of its order book.
Should you invest?
The team at Bell Potter is very positive on this ASX All Ords stock and sees a lot of value in its shares.
A recent note reveals that the broker has a buy rating and $2.00 price target on them. Based on its current share price, this implies potential upside of 68% for investors over the next 12 months.
Following the recent announcement of the proposed sale of the EM Solutions (EMS) business, the broker said:
Despite the impact on CY25 earnings, we view the sale of EMS as a positive development for EOS as the company now has a 2-year runway to focus on its core business and orderbook growth without any funding constraints. With several major near-term sales opportunities we anticipate significant earnings growth in CY26, with potential upside risk to our CY25 forecasts depending on timing of future contract wins
Our investment thesis is based on the current market valuation of EOS undervaluing the growth prospects in its core business and its current financial position. Post the completion of the transaction, EOS will have no debt, >$100m in cash, $165m in contracted revenue and several material near-term sales opportunities.
