nice article in todays afr, page-7

Hi Eos,

The half-yearly had earning per share of 35 cents. At the current price, that puts EOS on a PE of 3.

PE's for major defence companies in the US range from around 10-46. Northrup Grumman Corp currently trades at 10, against the SP 500 average of 15.

I'm very impressed by the way management have gone about consolidating operations in Tuscon after completing the acquisition of Recon Optical, which "for the first time vertically integrated all the IP, technology and production resources for all EOS remote weapons systems products under EOS itself, for all global markets."

Then you have the exclusive teaming partnership with NGC for CROWS3.

Ben Greene from the half-yearly, "In the remote weapons systems sector, EOS orders are at a 4 year high, and production capacity is being increased to meet expected future demand. The teaming arrangment and production sharing agreement with NGC provide an excellent platform to competitively address the imminent US Army CROWS requirement.

"Another key element in EOS plans in this sector is the long-term requirement of the ADF. In Australia the company expects the present demand to continue over the next decade, and is actively engaged to provide support for the Australian Defence Capability Plan which will shape future requirements."

In July, Northrop Grumman CEO Wes Bush announced the possible sale or spin-off of their ship building business to focus on electronics, aerospace and information systems. In October NGC filed documents with the SEC as a further step towards this goal.

So NGC see the future in electronics, aerospace and information systems. Is it just my imagination, or is this an extremely complimentary fit with EOS's other areas of expertise in space systems, space telescopes and space surveillance/debris tracking.

Ben Greene again in the half-yearly, "The ASRP grant has provided confidence that operational status will be achieved for EOS's space debris tracking technology, and opened the possibility of commercial and military space data contracts and an associated expansion of EOS's capabilities. These are very positive developments and EOS has never been better placed to achieve its objectives in the space sector."

Finally, some comments from David Singleton, former BAE Global Head of Group Strategy, and recently appointed to the board of QHL, who coincidentally are partnering with NGC for the JSF 35 program.

"The defence industry is one of the hardest sectors to enter. It has some of the highest barriers to entry of any industrial sector, and can be very daunting to make your first inroads. QHL has already achieved that essentially by the contractual positions (with NGC) that it has on its current programs. So that is a huge step forward.

"The thing to remember is that, although its hard to get in, once you do get involved in military programs yiour are typically there for 30 years, sometimes as long as 50 years, as these programs go through upgrades and devlopments and mid-lefe improvements. So, hard to get in, but once you're in, you're there for a long period of time."

While I posted these comments on another thread, they seems particularly relevant to EOS. EOS are already a small but well-established defence contractor in their own right.

Now, they are also recognised by, and in a significant partnership with, NGC, one the biggest defence contractors in the world, and are also operating in the three sectors that NGC have identified as their preferred areas of operation for future growth.

Seems to me Ben Greene is doing a superb job not only of positioning EOS to take advantage of some outstanding emerging longer term opportunities, but to also achieve excellent near term growth. If the CROWS3 contract comes home with NGC, that growth will be much, much nearer term and more rapid than the market is currently prepared to recognise.

None of which factors in what NGC's longer term interest in EOS may be. But with all that CROWS and SPACE Technology IP now residing 100% for the first time in the one company, that would be a very conveneient and tasty morsel to gobble up.

All of which on a current PE of 3 makes EOS, dirt cheap as you say!