Weekly Reports | 10:00 AM
This week's In Brief includes Electro Optic Systems under attack via short report, Austral Resources "amazing turnaround" with a copper growth story, plus winners and losers from GLP-1s growing popularity.
- Short report targets Electro Optic Systems, management and Canaccord Genuity repond
- Glencore's strategic alignment with a small cap, burgeoning copper producer
- Winners & Losers from GLP-1s Down Under
By Danielle Ecuyer
This week’s quote comes from DBS Economics & Strategy:
"Investors remain wary that the Fed’s steady-for-longer stance would collide with US President Donald Trump’s desire for significantly lower interest rates, especially under the leadership of his Fed Chair nominee, Ken Warsh.
"Lingering doubts about the Fed’s independence are likely to cap the USD’s upside.
"At the same time, the Congressional Budget Office’s renewed warnings about the widening fiscal deficits and rising national debt added to de-dollarisation concerns, i.e., recent news of some countries reducing their exposure to US Treasuries."
Shoring up contract details and resilience of balance sheet
Electro Optic Systems has issued an in-depth report to refute claims from a recent short report.
As highlighted by Canaccord Genuity, the rebuttal covers the key assertions, including the legitimacy of the counterparty to the South Korean 100kW HELW (High Energy Laser Weapon) conditional contract valued at US$80m.
Management confirmed ‘Goldrone’, a small but well-connected drone operator, as the counterparty that has the potential to raise enough capital for the initial $28m deposit by the Feb/March period.
This opportunity is not included in Electro Optics backlog or guidance until the contract becomes unconditional. It is conditional currently.
Secondly, the Marss acquisition for -$54m achieved total revenue of EUR243m from 2020-2025 with the shorter’s report leaving out the non-UK operations which generated a further EUR114m over the period. Management also confirmed the Marss potential pipeline is over EUR300m from existing and new customers, essentially from the Middle East and Europe.
Thirdly, the sale of non-core EM solutions for around $159m in cash in January 2025 improved the balance sheet post repayment of a -$61m debt facility. The company has cash of $107m or $53m post Marss and the broker expects earnings to move to positive EBITDA in FY26 with a gross profit margin of 45%.
Management also detailed, as noted by the broker, the validity of the $459m contract backlog, and net additions of $323m in 2025, with “potential for further contracts to be received in due course from the US Army”.
The counterparty to the 100kW HELW order in August last year was confirmed as the Ministry of Defence of the Netherlands and last week it successfully opened the 20k square foot HELW manufacturing plant in Singapore. At full utilisation, the analyst sees potential revenue of over $1bn assuming US$30m-US$50m/unit for larger orders.
Canaccord continues to retain a positive stance on Electro Optics with an unchanged Buy rating and $12 target, with the recent fall in the share price viewed as a buying opportunity.
FNArena's universe of daily monitored brokers consists of two Buy ratings and an average target price between the two of $12.36, one Buy rating is ascribed as 'Speculative'.
Burgeoning copper producer in the sweet spot with Glencore
MST Access detailed Austral Resources Australia ((AR1)) espousing the company is one of the “most remarkable corporate turnarounds” as the analyst initiated coverage.
Austral is a developing copper producer which has come out of a period of suspension as a multi-mine, multi-plant producer from a small-scale single asset.
In January, Austral acquired Lady Loretta from Glencore and the resources giant will in turn pay $57m to Austral with the mine adjacent to the Lady Annie mine which allows for mining at Lady Annie ore that needed a cutback, the analyst explains, onto the Lady Loretta lease to access.
The Mt Kelly Heap Leach facility has received a second production hub with the acquisition of Rocklands with a study in place for its restart in 2H2027.
Mt Kelly facility can process 25ktpa with Rocklands at 3mtpa while the latter asset has an estimated replacement value over $443m.
A recent $40m equity placement, as well as debt-for-equity swaps and the $57m from Glencore, means Austral is now well funded.
For context, Glencore has a strategic relationship with the burgeoning producer and has secured the supply of Austral’s copper units to its marketing division and Mt Isa smelter as well as rights to Rocklands capacity, Canaccord explains.
Management is targeting production of 50ktpa copper over a decade-plus timeframe and MST sees substantial valuation upside based on a net present value of the western and eastern hub operations.
The broker has a 38c valuation. Austral has a circa $178m market capitalisation.
The sole daily monitored broker in FNArena's universe that covers this company, Shaw and Partners has a Buy rating with a 20c target price.
The shares finished yesterday's session at 10.5c.
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