Up 102% in 2024, here’s why this ASX All Ords stock is now frozen

The S&P/ASX All Ordinaries Index (ASX: XAO), aka the ASX All Ords, is on the ascent today. Heading into lunch, the popular Australian share market index is up 0.7% to 8,000 points. However, one company in its ranks is stuck at $2.08.

Electro Optic Systems Holdings Ltd (ASX: EOS) is stationary at the $2.08 price point today after requesting a trading halt.

Considering its track record so far this year, the uneventful trading session is almost out of character for this defence technology company. The Electro Optic Systems share price has darted 102% higher in less than four months — a return that would appease the most demanding investors.

Today, shares in this company have powered down. So what’s the reason for this intermission?

This ASX All Ords share is tapping the market

What we know for sure is that EOS plans to launch a capital raise. According to the trading halt request, it will take shape as an institutional placement and a share purchase plan.

Those are the official details — straight from the horse’s mouth.

Now for what is rumoured.

As reported by The Australian Financial Review (AFR), it is believed that this ASX All Ords stock is on the hunt for $40 million from investors. The AFR’s sources say the proceeds will be used as working capital to ‘fulfil customer orders’.

Over the past few years, EOS has used debt to help fund its operations. Last month two loans were still on its books: a $15 million working capital facility at 19% interest and a term loan facility of $35 million at an interest rate of 26%.

That is some costly capital. So it makes sense for the company to seek funds that don’t come with the baggage of interest.

Why now?

Electro Optic Systems has pulled itself out of a massive hole. Now back to winning contracts and pumping out weapon systems, the ship appears to have escaped the choppiest waters.

Record full-year revenue of $219.3 million was reported last month, lifting 59%. The haemorrhaging losses were also patched, with losses reducing to $34.1 million from $53.6 million.

All these positives have fed into the EOS share price doubling this year. Investors are beginning to take down their guard on this formerly bloodied defence company.

The return of enthusiasm presents a prime opportunity to capture investors’ appetite and put the company in better financial shape.

The post Up 102% in 2024, here’s why this ASX All Ords stock is now frozen appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Why this ASX defence stock soared 16% on Wednesday
• Why APM, DroneShield, EOS, and NextDC shares are charging higher

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Electro Optic Systems. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/4K8AmrG