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Defence firm shares have drifted but it continues to make progress
Thursday 04 Nov 2021 Author: Tom Sieber

Chemring (CHG) 298.3p

Loss to date: 5%

Original entry point: Buy at 314p, 5 August 2021

Despite a positive reaction to defence firm Chemring’s (CHG) latest update, the shares are a bit below the level at which we made our positive call.

The drift in the share price seems at odds with the company’s continued progress. On 2 November it announced its US based subsidiary Chemring Sensors & Electronic Systems had won a $99 million contract from the US Department of Defense.

The full rate production contract was for the Enhanced Maritime Biological Detection system – an advanced sensor system to rapidly detect, collect and identify airborne biological warfare agents.

Chemring Australia, meanwhile, also received a contract modification valued at $20 million. This was in addition to the $22 million contract that was announced on 28 September 2021 and related to the supply of MJU-68/B infrared countermeasures in support of the F-35 programme.

Looking ahead, the company said results for the year to 31 October 2021 would be in line with the board’s expectations, with adjusted operating profit expected to come in at £57.5 million.

It is Chemring’s underappreciated cyber security business which attracted us to the stock and more detail on this area of the business when full year results are announced on 14 December could give the stock a lift.

SHARES SAYS: Still a buy. 

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