r21442
11 Sep 2015
MO comment [link]
tejo
28 Aug 2015
Another IC update I think that we all agree Cohort is a fine company but it looks fully valued right now. Future good prospects can only carry a share so far and we now need substantial rise in profits and dividend to provide a new base for further progress in the SP
r21442
27 Aug 2015
Another IC update Aim-traded shares in small-cap UK defence company Cohort (CHRT:375p) have now hit my upgrade target price of 375p, hitting a high of 390p on 10 August, so it's decision time. I first advised buying the shares at 215p ('Blue-sky buy', 6 October 2014), so the price is now 74 per cent ahead in the past 10 months or so. I last recommended running profits three weeks ago at 357p ('Acquisitive growth drives re-ratings', 6 August 2015), since when the company has announced a contract worth £11.2m with the Ministry of Defence (MoD) to provide the armed forces with tactical hearing protection systems for the dismounted close combat user.The contract has been awarded for four years, with an option to extend it for a further three years. The win follows on from a previous UK MoD contract earlier in the year, supplying Cohort's Tactical In-Ear Protection Plugs as part of the tactical hearing protection system for the basic user soldier.Factoring in the contract award, analysts now expect Cohort to report revenues of £117m in the 12 months to end April 2016, rising to £131m the year later to drive up pre-tax profits from £10.2m to £12m in the current fiscal year and to £14.1m in fiscal 2017. On this basis, the shares are rated on 14 times future earnings estimates. However, there may be scope for more gains if, as seems highly likely, Cohort continues to win new work that is currently tendering for. Potential contracts being pursued include submarine communications work; roadflow traffic enforcement systems in the UK and for export, including the red light system developed for rail crossings; and communications systems for surface vessels. In my view, any of these contracts could be the catalyst for additional share price upside if Cohort is successful. Run profits.
Jack Diamonds
13 Aug 2015
Contract win............. Excellent 4 year deal, with option to extend by a further 3 years.Initial Order value £11.2M......with more to follow.Good newsJackCohort's MCL subsidiary wins MOD hearing protection contract Cohort, the independent technology group, is pleased to announce that its subsidiary Marlborough Communications Ltd. (MCL) has been awarded a contract by the UK Ministry of Defence to provide the armed forces with tactical hearing protection systems for the dismounted close combat user ("THPS DCCU"
. The award follows a competitive tender process. The initial order value is £11.2m. Further orders are expected over the duration of the contract and the delivery schedule and total contract value are still the subject of discussion with the customer. The contract has been awarded for four years, with an option to extend it for a further three years. The solution being supplied by MCL was developed in partnership with INVISIO Communications, a leading Danish audio technology company. This contract win follows on from MCL's previous UK MOD win earlier in the year, supplying its Tactical In-Ear Protection Plugs as part of the tactical hearing protection system for the basic user soldier. Andrew Thomis, Chief Executive of Cohort plc, said:"We are delighted that MCL has been awarded the THPS DCCU contract. We look forward to working with the UK MOD to deliver this important equipment to soldiers. "The contract will add significantly to our already strong order book, which substantially underpins our revenues for Cohort's current financial year."
r21442
06 Aug 2015
IC comment on acquisition Cohort is a company I know all too well having first advised buying the shares at 215p ('Blue-sky buy', 6 October 2014), I reiterated that advice at 280p ('Flying high', 14 April 2015), and again at 312p when my previous price target was smashed following an earnings beat (‘Riding earnings upgrade cycles’, 7 July 2015). In fact, my upgraded target price of 365p is also starting to look too conservative. Following upgrades analyst Chris Dyett at broking house Investec Securities now believes fair value is around 400p a share, rather than his previous target of 360p.A smart bolt-on acquisition He has a point because I feel that investors are likely to warm to this week’s acquisition of EID, a Portugal based supplier of advanced electronic products and systems for the global defence and security market. The bolt-on deal makes sound strategic sense as EID is a hi-tech company with more than 30 years' experience in the design, manufacture and support of advanced, high performance command, control and communications equipment. Its products equip over 120 warships worldwide including naval communications systems for the Royal Navy and other NATO navies. Moreover, EID provides Cohort with a portfolio of complementary products and systems which have a strong global market presence, relationships in a number of important export markets in Europe, Middle East, Africa, Asia and Latin America, and access to EID's international customers for Cohort’s products and services.Importantly, the numbers stack up too as Cohort is acquiring EID for €16m (£11.2m) on a cash-free, debt free basis, or the equivalent of 11.5 times its operating profit of almost £1m in the 12 months to end March 2015. EID generated revenues of €14.5m (£10m) last fiscal year and had a closing year-end order book of €35.2m on which revenue of €12.4m for the 2015 fiscal year was already on order, so prospects look well underpinned for some time to come. And Cohort can easily afford to acquire EID as the company’s net funds increased by a fifth to £19.7m in the 12 months to end April 2015, despite paying out £17m on prior acquisitions. That cash pile easily covers the £11.2m net purchase price, but Cohort is also in advanced talks to arrange a new debt facility worth £25m with a syndicate of banks including RBS, Barclays and Lloyds. But even if the company doesn’t tap that facility, analysts at Investec still believe that Cohort will have net funds of £4.8m by the end of April, or a sum equivalent to 12p a share, so it still retains a strong balance sheet.Earnings upgrades Factoring in the contribution from EID, Investec have assumed the acquisition will generate revenues of £5m and a £500,000 operating profit in Cohort’s 2016 fiscal year, rising to revenues of £12.7m and operating profits of £1.3m in fiscal 2017. On this basis, the broking house now predicts that Cohort will lift pre-tax profit from £10.2m to £12.1m on revenues of £114m in the current financial year to produce EPS of 21.8p, rising to profits of £13.6m on revenues of £125m the following year to produce EPS of 24.6p. This means the shares are currently being priced on 14 times earnings estimates and are underpinned by a 2 per cent prospective dividend yield for the fiscal year ending April 2017. That valuation still seems reasonable to me especially as the new debt facility will give the company scope to make further earnings enhancing bolt-on acquisitions. Cohort’s record order book of around £158m post completion of the deal is highly supportive of analysts' revenue too.In the circumstances, I feel a multiple of 15 times fiscal 2017 earnings estimates’ is a fairer valuation for the equity, implying a target price of 375p. So if you followed my previous advice I would run your 60 per cent bumper profits with Cohort’s shares trading on bid-offer spread of 350p to 357p
r21442
07 Jul 2015
Another IC update today as well At the risk of sounding like a broken record, small-cap UK defence company Cohort (CHRT:312p) has also posted an earnings beat. Its shares have also smashed through my previous target price of 300p and are firmly in blue-sky territory, having first advised buying at 215p ('Blue-sky buy', 6 Oct 2014), and subsequently reiterated that advice at 280p ('Flying high', 14 April 2015).Buoyed by acquisitions, the company's revenues increased by 40 per cent to just shy of £100m in the 12 months to end April 2015, but it was the underlying growth rate that really stood out for me. Cohort's like-for-like sales soared by 23 per cent in the period which in turn helped drive up adjusted pre-tax profits from £8.3m to £10.2m, or £400,000 higher than analyst Roger Johnston at Edison Investment Research had predicted. EPS of 20.5p beat forecasts of around 18.5p by quite some margin too, and with cash generation impressive - net funds increased by a fifth to £19.7m despite Cohort paying out £17m on acquisitions - the board were able to hike the payout by a fifth to 5p a share. This means that net of a 48p a share cash pile, Cohort's shares are still only priced on 12.5 times historic net profits and offer a reasonable 1.6 per cent dividend yield.The other key take for me was that growth was across the board with each of Cohort's business units delivering revenue and operating profit growth. Bolt-on acquisitions are helping in this regard and enabling the company to enhance its position in its chosen niches and expand the product offering. Last summer's acquisition of a 50 per cent shareholding in Surrey-based Marlborough Communications, a supplier of advanced electronic communications and surveillance technology, is a case in point. So too is the purchase of J+S, a leading UK supplier of systems and in-service support for the defence and offshore energy markets. Its defence products include sonar systems, torpedo launchers and a range of other naval equipment. The company's closing order book of £134m included a £38m contribution from these two acquisitions and is highly supportive of analysts' revenue forecasts of £112m for the current financial year to end April 2016. If achieved this should underpin a 15 per cent hike in pre-tax profits to £11.7m. On this basis, Edison now expect EPS to rise to around 22p, representing a 5 per cent upgrade, and the dividend to be lifted by a further 20 per cent to 6p a share. This means Cohort's shares are priced on 11.6 times forward earnings and offer a 1.9 per cent prospective dividend yield.So with an order book at record levels, the full benefits of contract wins and last year's acquisitions coming through, and the newly elected Conservative administration offering a degree of stability for UK defence related spending plans, I feel that a higher valuation for Cohort's equity is in order. Indeed, applying a multiple of 15 times current year post tax earnings, and factoring in the company's bumper cash pile, I feel an enterprise value closer to £150m is fair, or around 365p a share, inline with the sum-of-the-parts target price of Edison.Offering a further 17 per cent potential upside, Cohort's shares remain a buy on a bid-offer spread of 305p to 312p
II Editor
07 Jul 2015
NEW ARTICLE: Cohort: The year everything went right "Cohort is a collection of small, semi-autonomous defence companies thriving in a moribund market by being quicker at giving the customer what it wants.With revenue, profit and net cash sharply up on the previous year, Cohort’s recent ..."[link]
r21442
26 Jun 2015
Re: NEW ARTICLE: Cohort tipped to surge ... Now the more reasoned IC comment.Cohort fires on all cylindersSavage government budget cuts have plunged most of the defence sector into chaos. But for Cohort (CHRT) record levels of revenue, adjusted operating profit and net cash suggest it is business as usual. Boss Andy Thomis attributes the company's strength to its positioning in niche markets and a product range that few others provide.Cohort's MASS business has capitalised on growing demand for electronic warfare operational support in the Middle East, one of the few regions where defence budgets continue to rise. That, and a growing presence in cyber security, saw the segment contribute almost a third of group revenue and over half of adjusted operating profit.Demand for submarine communication systems and training support activity, meanwhile, ensured that Cohort's other units proved their worth. That included impressive contributions from recent acquisitions Marlborough Communications and J+S, which together brought in £18m of sales and £38m of orders.Management isn't worried about further potential Ministry of Defence cuts derailing this progress. Aside from the £72m of orders due for delivery this year, Mr Thomis says state spending on submarines, intelligence and information systems will grow 20 per cent over the next three years. Broker Investec has upgraded its adjusted EPS forecasts for the year to April 2016 by 5 per cent to 21.3p (from 20p in 2015).Cohort's shares are up 15 per cent since our buy tip (239p, 13 Nov 2014), yet continue to trade at a discount to peers on 13 times forward earnings. Given the impressive number of contracts in the pipeline, exposure to niche growth areas and a solid balance sheet, we remain very bullish. Buy.
r21442
26 Jun 2015
Re: NEW ARTICLE: Cohort tipped to surge ... This was the incredibly negative IC comment on the day "Cohort (CHRT) reported lower profits despite higher revenue, as acquisition-related put a dent in its full-year figures. Pre-tax profits fell 12 per cent to £5.9m, from £6.7m over the same period a year earlier. Earnings per share also slid to 13.7p, from 14.4p."In saying that they have posted an update today - I'll post that separate.
Jack Diamonds
25 Jun 2015
Re: NEW ARTICLE: Cohort tipped to surge by a... and the Management are top notch and credible.............Nice to see these continuing to grow
II Editor
25 Jun 2015
NEW ARTICLE: Cohort tipped to surge by a quarter "Despite shrinking military budgets, defence systems and training company LSE:CHRT:Cohort continues to exceed expectations. Demand for its technology is growing, acquired businesses are performing well, and the company has a huge warchest for ..."[link]
r21442
14 Apr 2015
Latest IC commentary Shares in small-cap UK defence company C ohort (CHRT: 280p) are now in blue-sky territory having rallied by a third since I advised buying them at 215p ('Blue sky buy', 6 Oct 2014). True, they have yet to hit my six-month target price of 300p, but I feel it's only a matter of time given the company will be announcing another bumper set of financial results in little over two months' time. I am not the only one thinking this way as analyst Roger Johnston at Edison Investment Research, who initiated coverage on the company in mid-January, has a sum-of-the-parts fair valuation of 310p a share, or the equivalent to 15 times 2015 calendar year earnings estimates, a 10 per cent premium to the UK defence peers. Analyst Chris Dyett at broker Investec has a slightly higher sum-of-the-parts fair valuation of 325p a share. Peter Ashworth at Charles Stanley Stockbrokers has a 300p a share earnings multiple based target price supported by "the scope for profitable growth in the medium term as well as the visibility of the forward order book".Such a rating is fully warranted in my view as underpinned by a record order book of £146m at last October's half-year end, and with the benefit of a strong order intake in the second half to the end of April 2015 and some shrewd looking acquisitions last year, profit estimates look well underpinned. In fact, having already factored in an 18 per cent rise in pre-tax profit to £9.8m for the fiscal year to April 2015, based on a third rise in revenue to £96.2m, Mr Johnston predicts that order cover at the start of this year covered 50 per cent of his forecasts for the 2016 fiscal year. On that basis, expect revenue to rise by 12 per cent to £106m to drive up both pre-tax profit and EPS by 16 per cent to £11.4m and 21.5p, respectively. Furthermore, with net funds forecast to rise from £6.7m last October to £8.5m at the end of this month, or the equivalent of 21p a share, the company is well funded to make further earnings enhancing bolt-on acquisitions as chairman Nick Prest noted at the time of the half-year results. As and when these complimentary deals are done, expect further upgrades to the aforementioned profit estimates. It's worth flagging up too that the double-digit profit growth is also being driven by major contract wins, details of which I outlined when I last updated the investment case ('Armed for success', 23 Oct 2014), so there is an organic growth story here, too.In turn, this robust growth profile is enabling Cohort's board to maintain a progressive dividend policy that has seen the payout double since 2010. Having hiked the payout by 14 per cent at the interim stage, the board are predicted to raise the dividend per share by almost 17 per cent to 4.9p at the time of the full-year results in June. And with profits on an upwards trajectory, expect a further increase in the payout to 5.5p a share in fiscal 2016. On this basis, the prospective dividend yield is 2 per cent with the payout almost four times covered. The forward PE ratio is 13 for fiscal 2016.Clearly, there are some risks to consider, the most obvious being potential for a slowdown in UK defence spending in the aftermath of the forthcoming general election, which could impact some of Cohort's short cycle business activities. That said, going into the election with an order book at record levels, and the full benefits of contract wins and last year's acquisitions clearly coming through, I feel that the next trading update will be pretty positive when the company announces its full-year results. Offering a further 8 per cent upside to my target price of 300p, the shares remain a buy on a bid-offer spread of 272p to 280p.
r21442
09 Mar 2015
On the move So rapid that someone must know something but is keeping it to their close circle until RNS <cough> ?
II Editor
04 Feb 2015
NEW ARTICLE: How Richard Driehaus made a fortune by finding tomorrow's growth stars "In the pantheon of investing greats, Richard Driehaus is relatively unknown in the UK. Yet his brand of "buy high, sell higher" investing uses one of the most powerful factors known to drive long term market returns - momentum.Born in Chicago in ..."[link]
cashpharma
30 Dec 2014
Re: Times- Buy recommendation don't like this share. because of the secret nature of the businesses it runs visibility of its operations is too limited to invest in.
