Defence and aerospace firm Cobham (LON:COB) is an attractive investment, according to City broker Morgan Stanley.
Management recently reiterated its guidance for 2011 and said that opportunities within areas such as air-to-air refuelling should enable the company to return to growth, it said.
Yesterday the firm, which develops leading edge aerospace and defence systems, hosted an investor visit to its Cobham Mission Equipment facility in Wimborne, Dorset, UK.
The facility is the world market leader for such refuelling systems, providing fifth generation 'nose to tail' solutions and more than 1,000 systems have been delivered for fixed wing aircraft and helicopters.
Morgan Stanley rates the firm "overweight" and targets a price of 270 pence for the stock - an increase of 22 percent (current share price: 215 pence).
It said: "After a tough 2010, Cobham has re-based expectations to an achievable level and could surprise if cost savings out-pace."
The broker added that the firm's disposal of assets and the returns to shareholders along with the prospect of further returns in the second halfof this year and into 2012 make the company an "attractive investment".
Broker Deutsche Bank also said the management's update on the potential growth of air-to-air refuelling was positive.
"We estimate that the AAR business has revenues of around £40million (2.5 percent of group and 12 percent of Mission Systems sales). Management was very upbeat over prospects for AAR, seeing sales tripling by 2015," said analyst Benjamin Fidler.
The broker rates the stock as a 'hold' and gives it a price target of 230 pence.
Fidler added that the upside of the AAR business was "tempered by comments over the flow rate of US defence orders, which the management had confirmed as "subdued" and slightly belowed planned levels of the year to date.
On US defence orders, Deutsche Bank said: "Cobham commented there is no evidence of any catchup or bounce back in order placement rates. Order bookings YTD have been tracking behind Cobham's own planned levels, with an acceleration hoped for from Q3 onwards. A return to organic growth remains the core driver of any potential re-rating of Cobham's shares."