One to Watch: Explosive performer

Chemring3,239p -37pScotsman says BUY

I LAST wrote about Chemring in June when the share price was 1,982p and I bring it to your attention again, not to show how well the share has performed but rather because it still offers good value. The share is not as inexpensive as it was but it trades on a P/E of only 11.8x 2010E, falling to under 11x in 2011, putting it on a discount to the market that appears anomalous.

The company has reported yet another strong set of results with EPS 33 per cent up on 2008 with the dividend advancing 44 per cent. Analysts have had to increase earnings estimates between 4 per cent and 8 per cent for the next couple of years and it is likely there will be more upgrades to come.

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Management has a clear plan about the best way to continue to deliver sustainable returns for shareholders, which includes bolt-on acquisitions. The company announced the acquisition of the Allied Defense Group, a manufacturer of medium and large calibre ammunition with 89 per cent of revenues generated in Asia and the Middle East.

Bears of the stock would draw attention to potential cuts in defence spending in both the US and UK but Chemring's order book is 37 per cent ahead of the same period last year. Although there will inevitably be pressure on the budgets of western governments, the US military spend will grow this year. Any future cuts will be targeted at larger capital programmes rather than the niche areas the company operates in.

With the ongoing operations in Iraq and Afghanistan, devices such as explosive ordnance disposal and mine detection vehicles continue to be required by the military in ever greater numbers and consequently Chemring is set fair for the foreseeable future.

• The value of your investment could fall and you may get back less than you invested. You should take professional advice if you have any doubt about the suitability of this company for your portfolio.

Greene King

457p +14.4p

Broker says BUY

GREENE King's trading update was "slightly better than expected", according to Citi, which maintained its "Buy" recommendation on the owner of Dunbar's Belhaven brewery.

But the broker added that it did not expect to make any major changes to its forecasts for the full financial year.

Brewin Dolphin

137p +0.9p

Broker says HOLD

INVESTMENT manager Brewin Dolphin's Q1 update was in line with Numis's expectations.

Numis said: "Our recommendation remains 'Hold' on valuation grounds, although we trim our target price to 131p from 135p, reflecting lower surplus capital, partially offset with higher funds under management."