Electro Optic Systems Holdings Ltd (ASX: EOS) shares are having a very strong finish to the week.
In morning trade, the defence and space company's shares are up 20% to $11.27.
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Why are EOS shares rocketing?
Investors have been scrambling to buy the company's shares today after it announced a major new contract win.
According to the release, EOS has secured a US$124 million (~A$175 million) order for its Slinger Counter-Drone Remote Weapon System (RWS).
This system will be supplied to Generation 5 Holding, which is a 100% United Arab Emirates owned provider of defence equipment, technology and services headquartered in Abu Dhabi.
The company advised that the order includes the RWS, cannon, spares, training, and other supplies.
It notes that the systems are intended to strengthen defence systems in light of ongoing regional tensions in the Middle East.
The systems are expected to be manufactured in Australia and the United Arab Emirates. They will then be delivered during 2027 and 2028.
However, the order is subject to Generation 5 Holding's customary terms and will be subject to export approval requirements.
Joint venture
Also giving EOS shares a boost this morning is news that the two parties have entered into a binding, conditional, joint-venture shareholders agreement to establish an incorporated joint venture.
This joint venture will focus on the development, manufacturing, and global distribution of a 200-300kW next generation High Energy Laser Weapon (HELW) product.
It will also work on the manufacturing and distribution of EOS' existing 100-150kW HELW in the UAE and certain other Middle East and North Africa (MENA) countries.
The third goal of the joint venture will be the manufacturing and distribution of certain existing EOS RWS. This includes the R400, R500, and R800 in UAE and certain other MENA countries.
It notes that the joint venture is expected to be based in Abu Dhabi and will have a 50/50 equity contribution and profit sharing between Generation 5 Holding and EOS. This is subject to relevant UAE laws and government approvals.
Management believes the joint venture "could, subject to fulfilment of the conditions of, and compliance with the requirements of, the JVA, start contributing to EOS results from 2027 or 2028 onwards."
After that, the two parties advised that they may choose to extend the scope of the joint venture in the future if it is deemed desirable. This could include elements of command and control systems or space control capabilities.
Following today's gain, EOS shares are now up almost 300% since this time last year.
