They have two business units
1:Space Tracking Systems & 2: Fire Control Systems
Space Tracking Systems
The US Government and the Space industry currently uses a radar system for space tracking, which can only track the larger debris.
EOS has developed a laser tracking system which is complementary to radar.
Basically, radar is good for tracking general movement in space, yet EOS has the ability to focus in on specific debris/satellites and provide far more accurate information.
The successful NEOT trails (Near Earth Orbit Tracking) were the last in a series of tests commissioned by the Australian Defence force, yet conducted by the US Air Force. This test showed that EOS could detect small objects and obtain a precision orbit solution for targets for which they had no prior knowledge, (i.e. EOS didn't know where they were and had to find them.) This technology has wide ranging benefits to both Governments and private companies.
Currently EOS is working with Lockheed Martin to build a number of additional tracking stations in Australia to move this “concept” to a commercial operation by the end of 2016.
Lockheed is spending up to $83 million to move to a 50/50 JV with EOS re this business unit. The JV is currently building a tracking station in WA to complement EOS’s existing site in Canberra. Other sites are also likely to be announce over calendar 2016.
The business model EOS/Lockheed are implementing is similar to the existing infrastructure model.
The characteristics include:
The provision of an essential service; (as debris orbits change daily, they need to be tracked daily, hence there is an ongoing requirement for the data)
Significant barriers to entry and a generally dominant market position; (Initial capex is around $150 million, yet access to the IP which only EOS controls, is the biggest hurdle for competition.)
Long duration assets, with a life of 20+ years;
Have high upfront costs, but low ongoing operational costs; (The tracking stations are largely automated, hence high margin)
Long-term, stable cash flows, generally with low volatility compared to other asset classes; (EOS’s main clients will be Government agencies and the large multi national satellite operators and insurance agencies, all requiring ongoing data, via long term contracts.
Once the tracking facilities are completed, it is estimated that revenue from satellite/insurance operators etc could be very large.
This Business unit also has a production and testing facility for the design and manufacture of observatory systems and telescopes. EOS anticipates further telescope orders going forward as their JV tracking stations are rolled out in conjunction with Lockheed Martin.
Fire Control Systems:
Fire control systems are designed to give soldiers an unfair advantage. The system enables a target to be pinpointed from within a moving vehicle to range of up to 2,500 m. This target can then be tracked on the move and taken out all within the confines of a vehicle. A number of countries including the USA, Singapore and Dutch armies currently use this weapon system. EOS currently has one product in production with the likelihood of a second variant coming into production over the medium term. EOS is current bidding on a number of large contracts in this sector.
The Company
EOS has around 57 million shares on issue and at $1.40 caps at around $80 million.
They have cash of around $11 million, and no debt.
They expect revenues of around $25 million for the 2016 calendar year and to be profitable.
Once the tracking stations have been completed by the end of 2016, EOS expects first revenues from this sector within 6 months of completion, which they have been working towards, and funding ($80 mill) for the last 7-8 years, and still have $10 mill cash at bank, and no debt?.
EOS Price at posting:
$1.39 Sentiment: Hold Disclosure: Held
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