Edison Investment Research Limited: Edison issues outlook on Cohort (CHRT)

London, UK, 20 December 2018

Edison issues outlook on Cohort (CHRT)

Following a challenging first half, Cohort (CHRT) has seen excellent order intake in recent months. These underpin anticipated sales for H219 and provide longer-term visibility through some significant multi-year agreements. In addition, the company has bought Chess Technologies, broadening the geographic reach and product range while augmenting growth prospects. The purchase is aligned with the agile growth strategy and was financed through cash and the recently renewed bank facility. Having strongly outperformed its UK defence peers over the last 12 months, the FY20e P/E of 10.7x represents a discount of around 18% to its UK defence peers.

The significant rise in the share price over the last 12 months delivered a strong outperformance of its UK aerospace and defence peers. The FY20e P/E remains at a c 18% discount to the UK defence peer average. Our fair value, based on capped DCF and peer group sum-of-the-parts (SOP), stands at 530p (previously 549p) which, if achieved, would place Cohort on a c 12% premium to its UK defence peers.

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