| SATCOM Deal Is Group’s Largest Acquisition | Equity Development

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25th Nov '24 by Equity Development

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Cohort (LON:CHRT) - our latest note is freely accessible here: https://www.equitydevelopment....

Cohort has announced a conditional sale and purchase agreement to acquire EM Solutions Pty Ltd from Electro Optic Systems Holdings Ltd, for an enterprise value of AUS$144.0m, c.£75.0m This is Cohort’s largest acquisition to date. The purchase will be funded from Group cash resources, debt facility plus a share placing, and is expected to be EPS-accretive from FY25/26.

EM Solutions offers a range of satellite-based secure communications systems including satellite on-the-move (SOTM) and radio frequency (RF) systems, plus contract manufacturing and design. For Cohort it adds complementary expertise in satellite communications for global naval and defence applications.

We estimate that the acquisition enhances Cohort FY25 revenue by 4% (pro rata for 151 days remaining) and in FY26 by 17%, with an uplift to (adj.) EBIT of 10% and 32% respectively.

Our Fair Value is raised to 1090p/share, indicative of a FY26 E PE of 19.4x and EV/EBITDA of 10.1x. This compares favourably to a market cap weighted average for Cohort’s peer group of: PE, 21.3x and EV/EBITDA of 12.1x - see our research note for more.

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