The Electro Optic Systems Hldg Ltd (ASX: EOS) share price has closed 3.23% higher today after earlier hitting an all time high of $8.29. So far in 2019, Electro Optic shares are 226% higher.
On Monday, the Australian defence and space technology company announced the creation of a new business segment, EOS Communication Systems, following a series of technology breakthroughs that allow satellite communications to be conveyed via laser beams.
EOS have reported investing $250 million over the past 9 years to complete several technology breakthroughs. The most recent breakthrough enables lasers to transmit into space with 0.1% of the power previously required.
According to the company, this most recent breakthrough, among several others, enables lasers to be applied in satellite communications for the first time. Laser-based optical communications can achieve 20 times the maximum bandwidth of current microwave technology, and Electro Optic Systems estimates the total addressable market for this technology to be in the order of $120 billion over the next 20 years. The new business segment will be operational from Q4 2019.
Following on from Monday's announcement, Electro Optics today announced it has acquired 100% of EM Solutions Pty Limited (EMS), a leading microwave satellite communications company. Electro Optics acquired EMS via a script and cash offer, valuing EMS at approximately $26 million. Ben Greene, Group CEO, reports the acquisition will be immediately earnings accretive. Dr Greene said:
This acquisition immediately establishes EOS as a credible provider for a portion of the $120 billion of space communication infrastructure and equipment to be replaced over the next 20 years. EOS intends to expand this portion to embrace most of the identified market by 2023. EOS will leverage its agile business processes and its advanced technology, now including EMS innovation, to provide strong market differentiation and competitive advantages in this $120 billion market.
Electro Optics also reported it is looking at other areas to exploit the EOS suite of technologies in the space sector.
Foolish takeaway
The Electro Optic Systems announcements this week are potentially transformative. With a $600 million order backlog that will drive revenue growth at 45% p.a. over the medium term, Electro Optics Systems' new business segment has the potential to drive revenues significantly higher still in the long term.
