Financially,thebusinessisinfineshape。

Atthelasttradingupdate,theboardsaidresultswereontrackfortheyeartoApril2011,withnetcashclosingat£1。

5minSeptemberontopofahealthy£110morderbook。

Moreover,CohorthasjustbeenselectedasthepreferredbidderinaconsortiumledbyLogicafortheMoD’sProjectShepherd。

Thisisablue-ribboncontracttoupgradetheUKmilitary’selectronicwarfarecapabilities。

Intermsofthenumbers,housebrokerInvestecispredicting2010/11turnoverandunderlyingearningspershareof£78mand11。

6prespectively。

Thefirmalsopaysa2。

3pdividend。

PersonallyIwouldvaluethestockonan8timesEBITAmultiple,whichdeliversanintrinsicworthof115ppershare。

Cohortplc(Aim:CHRT)

Whatarethepossiblepitfalls?

Cohortisexposedtotheusualconcernsrelatedtobeingasmalldefencecontractor:thethreatoffuturetroopwithdrawalsfromtheMiddleEastandtheeconomiccycle。

ThereisalsosomeuncertaintysurroundingtheexactdetailsoftheUKbudgetcuts(70%ofrevenues),alongwiththeboard’sturnaroundplansfortheunderperformingSEAdivision。

Lastly,thesharesarethinlytraded,sobewarebiddingupthepriceifyoudecidetobuy。

Allthesame,armedwithasolidbalancesheetandstuffedfullofclevertechnology,thegrouplookslikeasolidplayontheimportanceofcyber-warfare。

Indeed,giventhatchairmanNickPrestsoldtankmakerAlvistoBAESystemsin2004for£355m,thereiseverychancehewilldosomethingsimilarwithCohort。

Interimsaredueouton16December。

Recommendation:SPECULATIVEBUYat83。

5p(marketcap£34m)

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