Electro Optic Systems Holdings Limited (ASX: EOS) shares have reached higher today. The Electro Optic share price is up 1.87% after the company announced a resumed major overseas customer contract worth $150 million.
The news sent the company’s shares as high as $5.70 during the opening bell, before they settled back to $5.44 at the time of writing.
What did Electro Optic announce?
Electro Optic advised it has achieved a key step in restoring cash flow on the back of re-initiation of a major overseas contract.
A team of senior engineers from the company have travelled to an overseas delivery point to commence delivery and testing. The products are valued at $150 million and the revenue will be a welcome relief to the company as it reported a meek FY20 result.
Electro Optic was previously affected by product delivery and acceptance delays. The closure of airports and borders, travel prohibitions and lockdown of the company’s facilities saw an immediate revenue decline.
The global defence contractor noted that international freight capacity is now operating back to sufficient levels. Over $100 million worth of Electro Optic products have been exported with an additional $150 million to be delivered in the next 6-8 weeks.
Furthermore, Electro Optic said that its facility located in the customer’s country has re-opened after being closed for 4 months. It is expected that technical teams will provide testing and support of integration with components and vehicles by suppliers.
Lastly, the company anticipates cash flow to resume in Q4 2020 and the accumulated backlog of product deliveries to be cleared in six months.
About the Electro Optic share price
The Electro Optic share price has risen more than 84% since falling to its 52-week low of $2.95 in March. From reaching an all-time high of $10.80 pre-COVID in February, the Electro Optic share price is down over 27% since the start of the calendar year.
Should you invest?
I believe that the Electro Optic share price weakness presents a buying opportunity for patient investors. Electro Optic is the largest defence contractor in the Southern Hemisphere and is considered important to the security of Australia’s national interest.
Post-COVID-19, I think that the Electro Optic share price could shoot higher over the next 18-24 months, providing the company is able to fulfil its contract deliveries.
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More reading
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Aaron Teboneras owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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