EOS shares set to take a hit on news of Saudi weapons deal

High tech defence company Electro Optic Systems is exporting a next-generation weapons system to Saudi Arabia, alleges the ABC.

The news, released this morning, has had no impact on the EOS (ASX:EOS) share price: Commsec and Nabtrade had indicative opens of $2.65, which is down slightly from $2.70 where it closed at last night, but so far the potentially multi-billion-dollar deal hasn’t resonated with investors.

A prior deal in the region with the UAE, which EOS has been forced to come clean on after the State said it was a customer, is worth $450 million.

The deal comes at a time when public weapons deals with the Middle Eastern oil state are on the nose.

Both the US and the UK have pulled back from selling weapons to Saudi Arabia, in the wake of the murder of journalist Jamal Khashoggi in an embassy in Istanbul, Turkey.

EOS’ remote weapons systems (RWS) are platforms which hold military cannons, machine guns and missile launchers.

These can be mounted on small military vehicles or naval vessels, and remotely operated by a soldier who stays safely inside.

The ABC says it has seen confidential EOS board minutes which describe signing a Letter of Intent (LOI) for the sale of 500 remote weapons systems units which are for the Saudi Ministry of Interior.

The minutes reveal the company agreed to provide the RWS for use by Saudi Arabia in lots of 20 units from that year.

EOS has a business arrangement with US arms manufacturer Orbital ATK, via which the RWS is supplied to Saudi Arabia.

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EOS has some very big names on its board, including one ex-Labor minister, a former air marshall and a former general.

Fred Bart chairs the company. He is a personality in investing circles who also runs Audio Pixels (ASX:AKP), a company that claims to be making a speaker that can direct sound towards one angle only but which is yet to produce a working prototype.

Former Labor senator and minister Kate Lundy joined in March last year.

And Peter Leahy AC, a retired lieutenant general who ran the Australian army, and Geoff Brown AO, a retired Royal Australian Air Force air marshall, also sit on the board.