With a supportive government, Australian defence companies are now focusing on innovation and growth. Some of these potential growth companies are presenting opportunities. Investors eager to benefit from the trend can consider these high growth stocks from the sector.
Electro Optic Systems Holdings Limited (ASX: EOS)
Electro Optic Systems Holdings Limited (ASX: EOS) has announced significant strategic developments and order wins, underscoring its transformation focus and growth potential in core markets. The Company is among the best growth stocks to buy now having secured new orders totalling approximately A$33.7 million, reflecting ongoing diversification of its Remote Weapon System (RWS) offerings and customer base.
Key highlights include a EUR8.2 million (~A$13.6 million) order for Counter-Drone Container-Based Remote Weapon Systems (CBRWS) from a new Western European customer. The systems, integrated with a 70mm long-range counter-drone rocket, are scheduled for delivery in 2025. Additionally, EOS Singapore received orders worth SGD17.1 million (~A$20.1 million) for RWS spares, with deliveries planned for 2025 and 2026. These orders validate EOS' strategic initiatives and reinforce its positioning in the rapidly expanding counter-drone market.
In line with its strategic shift, EOS has entered a binding agreement to divest its Naval Satellite Communications subsidiary, EM Solutions Pty Ltd, to Cohort plc for an enterprise value of $144 million. This divestment will unlock capital to support EOS’ focus on advancing its core capabilities in RWS, High Energy Laser Weapons, and Space Control. Management emphasizes the compelling growth opportunity within the counter-drone sector, leveraging EOS' established technological expertise. Operationally, Q3 2024 showcased robust manufacturing and delivery activity. EOS completed RWS production for a longstanding Middle Eastern customer and an Australian domestic contract, with notable deliveries of its Slinger Counter-Drone Systems to a German client. The Company also advanced RWS testing with a new strategic customer in the Middle East and secured A$9 million in space technologies contracts domestically.
Order book development remains a priority. Notable opportunities include advanced negotiations for the Land 400 Phase 3 RWS contract in Australia (up to A$100 million, 2026-2027 delivery) and potential orders from a new North American R800 RWS customer (up to A$30 million, 2025 delivery). EOS is also pursuing opportunities in Ukraine and with donor nations, alongside ongoing demonstrations to secure additional conditional orders. As of 30 September 2024, EOS reported a cash balance of $55 million, a sequential increase of $2.8 million, with an additional $64.2 million in bank-supported guarantees. These developments position EOS favorably to capitalize on growth in the counter-drone market and enhance shareholder value through disciplined execution of its transformation strategy.
Austal Limited (ASX: ASB)
Austal Limited is one of the top growth stocks as it has recently secured multiple significant contracts that highlight its growth in both Australia and internationally. On December 23, 2024, Austal Australia was awarded a $137.02 million contract for the construction of two additional Evolved Cape-class Patrol Boats (ECCPB) for the Australian Border Force (ABF). This brings the total number of ECCPB’s Austal is building for the ABF to 12. These vessels are crucial to Australia's national security, enhancing the Australian Border Force’s maritime surveillance and border patrol capabilities. Additionally, Austal has delivered eight Evolved Cape-class boats to the Royal Australian Navy since 2020, and has also been tasked with constructing other vessels like the Guardian-class Patrol Boats and the Landing Craft Heavy (LCH) under various government projects.
Austal's commitment to expansion is also reflected in its growing role in defense contracting for the US Navy. On December 6, 2024, the US Navy exercised US$48 million (~A$74.4m) in options to continue maintenance work on Littoral Combat Ships (LCS) deployed in the Western Pacific. This brings the total contract value to US$166.4 million, demonstrating the Navy's confidence in Austal's ability to provide cost-effective and efficient sustainment services in the region. This work is part of Austal's broader strategy to build a sustainable and profitable defense business, particularly by focusing on repeat contracts and in-theatre maintenance, which provides strategic benefits and cost efficiencies for the US Navy.
Austal is focused on expanding its capabilities both in Australia and the US. The company has a $12.7 billion order book, covering 14 different vessel programs, with ongoing projects including the $20 billion Strategic Shipbuilding Agreement in Australia, which aims to position Austal as the leading shipbuilder for long-term Australian defense needs. Additionally, the company's service and support business are on track to hit $500 million in revenue by FY2027, with its San Diego yard expected to come fully online by FY2026.
Source: Company’s Report
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