Tuesday newspaper tips: Chemring, Falkland Oil&Gas

Ordnance and defence electronics manufacturer Chemring is successfully weaning itself off its reliance on Western defence budgets after being hit by the drawdown of forces in Iraq and then Afghanistan – together with a few production problems along the way. The result is a record order book – for recent years – of £592m as of 31 August. That is almost £100m ahead of where it was at the half-year stage. So while the build-up in orders contributed to an increase in debt the 24% rise in revenues to £119m still looks healthy enough.

That leaves the shares, trading on a ‘forward’ price-to-earnings multiple of 14 still looking like ‘good value’ for the long-term. The worst seems to be behind the company, so “buy for the long-term,” The Times’s Tempus says.

Stock in Falkland Oil&Gas has been wanted of late, as traders speculate on the outcome of its latest drilling campaign, but investors should proceed cautiously. Indeed, Peel Hunt estimates success at the Humpback prospect alone, which is located off the south-east of the Falklands, could be worth 24p a share.

Nonetheless, the recent rise in the stock can also be put down to the low trading volumes in the shares. So while this latest campaign got off to a good start with a discovery at the Zebedee well in the North Falklands Basin, the region’s drilling record for the sector has been marked by a series of failures in recent years.

“Make no mistake, backing oil exploration off the Falkland Islands remains about as high risk as investing can get. Avoid,” says The Daily Telegraph’s Questor.