Canaccord upgrades Chemring to 'hold' after turnaround

19th Sep 2014 10:10

Shares of aerospace, defence and security technology group Chemring were given a boost on Friday after Canaccord Genuity lifted its rating from 'sell' to 'hold' and hiked its target price from 160p to 225p.The broker said that the stock is moving to a "recovery play" after the end of major balance-sheet restructuring activity.Analyst Charlotte Keyworth explained: "The successful re-financing of the revolving credit facility has right-sized to £70m, down from £230m; a level we deem appropriate for a business generating £400m in sales."This follows the disposal of the working capital intensive European munitions business in May, and £102.5m of proceeds used to pay down US private placement debt, in aggregate incurring 12.6% in early repayment interest (£13m). This lowers interest expenses by £3m in 2015."She said that these incremental balance-sheet "efficiencies" are a powerful catalyst in the company's turnaround story.Keyworth said that while Chemring has low visibility on future orders and trading remains challenging, increasing global geopolitical tensions should provide positive momentum.The stock was up nearly 2% at 242.12p by 10::04.