In Brief: Kingsgate, Electro Optics & Bhagwan Marine

Weekly Reports | 10:00 AM

This week's In Brief focuses on three stocks across three hot sectors; gold mining, defence, and contracting.

-Gold revival drives Kingsgate’s turnaround as Chatree mine ramps up
-Defence stock Electro Optics rides momentum on contract pipeline and laser weapon prospects
-Tight vessel markets boost outlook for Bhagwan Marine

By Danielle Ecuyer

This week's quote comes from the RBA's Financial Stability Assessment.

"The international outlook remains clouded in uncertainty, including in relation to fiscal sustainability concerns in some advanced economies and the possible lagged effects of tariff increases on prices and activity in the United States.

The risk of regulatory fragmentation across the international financial system has also increased, as jurisdictions pursue diverging priorities, including in banking and digital assets regulation.

"These uncertainties add to the growing risks to the financial system stemming from cyber and operational incidents."

Thailand's only gold mine is firing on all cyclinders

With precious metals flavour of the month, or should that be the year, Moelis’ latest initiation is on Kingsgate Consolidated ((KCN)), which operates Thailand’s only gold mine, Chatree Gold, around 280km north of Bangkok.

The gold producer is capitalised at around $987m.

Under what the analyst postures as a de-facto nationalisation, the Thai Government shut down the mine in 2016 citing emergency powers over environmental concerns.

Kingsgate’s management placed the mine into years of care and maintenance and ultimately, through international legal arbitration, reached a settlement in 2022, returning the miner full rights to Chatree.

Under care and maintenance, the mine produced 1.8moz of gold and 10moz of silver. Post the reinstatement, major refurbishment of the processing plant and fleet upgrades, Kingsgate restarted mining in mid-2024.

The mine has processing capacity of over 5mtpa with a significant landholding to potentially extend the mine life.

Production for FY25 came in at around 75koz gold and over 600koz of silver, with FY26 guidance at 85-95koz gold or 93-103koz AuEq. The analyst flags this is expected to lift with management’s outlook at 95-120koz gold production between FY26 and FY28.

The site has two parallel plants originally developed for nameplate capacity of around 5mtpa. The plants have been refurbished, and processing recoveries have averaged around 82% for gold and 58% for silver since the restart.

Throughput has already come in above nameplate at 5.4mt for FY25. Exit rates for 4Q25 inferred annualised capacity of around 5.7mtpa. Power is sourced from the national grid with a substation some 2km away from the site.

Kingsgate also holds the Nueva Esperanza project in Chile, which remains at pre-feasibility stage and offers long-term optionality to develop a “silver-rich” mining operation.

Moelis forecasts free cash flow of $135m/$166m in FY26/FY27, respectively, which equates to a free cash flow yield of 15%-18%.

The balance sheet has been re-structured positively via recent equity raisings and debt financing with net debt of $40m and cash of $24m.

An on-market buyback has already started which, in the analyst’s opinion, offsets returns to potentially balance any geopolitical risks, either real or perceived.

The stock is Buy rated with a $4.40 target price and assumes a peak in the gold price of US$3,282/oz in mid-2026 before moving back to a long-term price of US$2,598 by September 2029.

In terms of sensitivity, Moelis points to a valuation of around $6.15, suggesting some 79% upside, if the spot gold price were to remain around current levels in perpetuity.

Contracts deferred and not denied is a win 

Gold is not the only sector to have been in the momentum box of late, with share prices of Australian defense stocks like Electro Optic Systems ((EOS)) and Droneshield ((DRO)) equally on a tear.

Electro Optic recently rebased its 2025 revenue outlook to $115-$125m, a downgrade of -24% on the delay in specific “advanced opportunities". Canaccord Genuity clarified this implies second half 2025 revenue of $76m versus the analyst’s forecast/consensus at $114m/$116m, respectively, at the midpoint.

Around 50% of the forecast 2H2025 revenue is underwritten by the existing $299m order backlog, which stood at $307m as at Aug 22.

The deferred contracts are now expected to be signed either in 4Q2025 or 1Q2026/1H2026, and assuming all three are brought over the line, the order backlog would rise to around $420m for FY26.

The three cited are the Land 400 phase 3 remote weapons system (RWS) contract, around a $100m opportunity; a new RWS for a European customer at circa $20m; and a vehicle-mounted R400 ‘Slinger’ counter-drone system for a North American customer worth over $50m.

Canaccord anticipates circa 50% of the backlog to be delivered in FY26, at an estimated $188m of revenue, or an upgrade of around 12%.

Post the first order from a NATO member for a 100kw ‘Apollo’ high-energy laser weapon (HELW) last month at $125m (EUR71m), there have been no new announcements.

Management contends it has 50% of this emerging market up for grabs, and Canaccord believes its competitive advantage exists in intellectual property and expertise along the HELW production chain, including independent manufacturing in the company’s laser facility to work around import restrictions.

Market expectations are pitched high for HELW’s growth, and the broker sees a near-term catalyst as a second HELW contract to be achieved in 2026 for between $50-$100m.

Canaccord has raised its target price to $10 from $5.45 and downgraded to a Speculative Buy from Buy rating.

FNArena recently published a technical update on the stock:

https://fnarena.com/index.php/2025/09/23/electric-optic-systems-poised-for-a-breakout/


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