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|03/10/2016 10:10:47||London Stock Exchange||Total Voting Rights|
|29/09/2016 10:53:48||London Stock Exchange||Contract Win|
|01/09/2016 09:05:53||London Stock Exchange||Total Voting Rights|
|31/08/2016 07:00:09||London Stock Exchange||Q3 UPDATE|
|25/08/2016 15:32:25||London Stock Exchange||Holding(s) in Company|
|17/08/2016 11:31:07||London Stock Exchange||Holding(s) in Company|
|12/08/2016 09:34:25||London Stock Exchange||Director/PDMR Shareholding|
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Back on Track?
09 Sep 16
We have reviewed our financial model following the Q3 update and a conversation with outgoing FD. With less than two months trading left, the company is confident of meeting FY expectations, albeit with some help from FX. We have raised our forecasts but stay below consensus mindful of the fact that the final quarter to October is expected to be the most productive period for the company in terms of revenues, profits and cash flow. For us, cash flow is critical given that the primary driver of share performance in the past year has been the weakness in the balance sheet. If we are to believe the consensus then the total net cash inflow in Q4 will total around £57-59m after an underlying net cash outflow of £46m, excluding the rights issue proceeds of £76m and FX impact of £22m, in the first three quarters of FY16. With the majority of US collections expected in Q4, the management is confident of achieving this target. We raise our target price by 27% to 136p reflecting the 13% increase in FY16 EPS forecast and the rerating of the sector from 13.9x to 14.6x since the middle of July.
14 Jul 16
Chemring hosted a lunch yesterday for analysts and I got the opportunity to speak with various members of the senior management. The key takeaway for me was that things are going according to plan but there are no obvious upside risks. Middle East markets remain quiet. The US presidential election still appears to be the main catalyst for a change in sentiment. The general opinion was that both Clinton and Trump would be a positive but in different ways. Clinton is expected to remove some of Obama’s constraints on defence budgets. Trump, on the other hand, is expected to free up more export markets.
A Tall Order
22 Jun 16
The management have left themselves with a big ask in H2/16 to deliver on FY16 expectations even after the c3% downgrade yesterday. To meet the revised FY16 expectation, H2/16 revenues needs to grow by 48% sequentially while operating margins are expected to grow nearly 8-fold to 16%. While the first task looks more attainable, the second relies on everything going to plan. Recent history suggests caution, extreme caution. However, yesterday’s 18% fall has brought the share price closer to our target of 107p, equivalent to sector rating of 13.9x FY16 PG EPS forecast. Hence, we are moving our recommendation from SELL to HOLD.
Gone Till November
14 Apr 16
Our meeting with the Finance Director yesterday generated energetic use of pen and keyboard skills but left our headline numbers and thoughts largely unmoved. We acknowledge self-help measures but this is not enough to allay the primary concern over the quality of the order book and risk of further disappointments. Converting some orders into timely revenues and cash remains a challenge, while low oil revenues are pushing out export wins. Like FY15, we are again relying on a strong H2 to deliver expectations assuming there are no more delays in customer acceptances, issues in supply chain, etc. While the financial markets reacted positively to last week’s update on the 40mm order, to us it only served to highlight the fragility of forecasts. This brings us to back to where we started with our BUY initiation in August 2014 – a protracted conflict involving the US and allied ground troops will be instrumental to changing Chemring’s rating. The foreign policy of the next US president could be the catalyst. Ted Cruz anyone?
Panmure Morning Note 30-03-2016
30 Mar 16
The shares jumped 4% yesterday following news that the Pentagon has awarded Chemring Military and Alliant Techsystems a five-year firm-fixed-price contract worth $750m for non-standard ammunition and non-standard mortar weapon systems. While we have upgraded our revenue forecasts, we have cut our EPS forecast by 16% due to the continuing delay on receiving advance payment on the 40mm Middle East ammunition order. We also expect higher interest charges due to the sharp increase in operating cash outflows in the first quarter of FY2016, which along with the weakness in sterling against the dollar, is slowing down efforts to reduce net debt. We are cutting our target price to 107p (115p).
Panmure Morning Note 21-01-16
21 Jan 16
The collapse in the oil price is clearly starting to take its toll on Mid-East defence spending. While the management is sticking to its FY2016 outlook, trading since the start of the fiscal year has been below management's expectations. The company is again hoping for a better H2. The rights issue of £80.8m which will raise net just £75m will be used to cut net debt of £154m at end-Oct.
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Fighting the waves
25 Oct 16
Management action in response to a tough trading climate and falling profits should contribute to a sound recovery in profits next year. Following share price weakness, the group is valued at a substantial discount to both the broking market leader Clarkson and to other peers. Meanwhile, if the dividend can be held, the shares offer a well above-average yield, pending an eventual improvement in trading conditions.
21 Oct 16
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N+1 Singer - Morning Song 21-10-2016
21 Oct 16
Xaar has announced that its FD, Alex Bevis, will be leaving to pursue other opportunities after almost 6 years with the group. A search is underway for his replacement and Alex will remain with Xaar until 24th March 2017. While Alex’s departure is disappointing, Xaar’s strategy remains on track, with new product launches expected to drive near term organic sales growth and a target of £220m sales by 2020. This reflects stronger leverage of Xaar’s innovative technology into a broader spread of end products and markets, with the £220m expected to be composed of broadly equal contributions from ceramics, packaging & product printing, Thin film/P4, and partnerships/M&A. Prospects for the group are exciting, with positive news flow on product launches and end markets anticipated over the year ahead.
FY17 expectations unchanged. Interim dividend maintained
25 Oct 16
Interims reflect tough markets which impacted Technical. Shipbroking delivered a resilient result and Logistics has performed well. The interim dividend has been held at 9.0p. The group anticipate an improvement in H2. The Board’s expectations for the year are unchanged based upon the strength of the order book due in H2, its ongoing market coverage and the benefits of action taken previously. We have retained our FY2017 PBT forecast of £8.7m and a maintained dividend. We reiterate our Buy and adjust our TP to 450p.
N+1 Singer - Morning Song 20-10-2016
20 Oct 16
A highly disappointing update from Senior reports a number of issues adding up to the Group being behind expectations. Following the Flexonics issues over the past 12 months, there are now issues on the Aerospace side which are affecting the outlook. In a period when some stability was required, this is disappointing. We have downgraded FY16 EPS by 6.8% and, whilst we see Senior remaining a US takeover target, we move from Buy to Hold (target price down from 262p to 196p) until more clarity is available on the direction of the Group.