Broker's View: Evolution Securities

Evolution Securities has initiated coverage of engineered, bespoke components business TT electronics with a buy stance and 130p price target, representing 30 per cent upside to the current 100.75p market price.

Following a recent trading statement from fully listed recovery stock ‘TT’, focused increasingly on growth markets such as aerospace and defence, medical and broader transportation, analysts Harry Philips and Rob Ellis decided to upgrade their December 2010 estimates.

Earnings per share have been upped by a hefty 35 per cent to 6.5p – based upon a very dramatic improvement in pre-tax profits to £15.5 million – with earnings estimates for 2011 and 2012 raised by more than 18 per cent and 11 per cent to 8.4p and 12.8p respectively. TT could potentially grow profits to more than £30 million over this period.

Delivering the goods
Impressed with the turnaround being delivered by a proven management team in the wake of a strategic review carried out in January 2009 by CEO Geraint Anderson, Evolution also notes that ‘sales in the first four months of the year were 27 per cent ahead of last year as European auto production recovered at a faster pace than expected, with production up 33 per cent in the period’.

Research colleague Adrian Kearsey expressed bullish sentiments about high-performance foams-maker Zotefoams following an upbeat first-quarter update. Flagging up the strong start to the year enjoyed by Zotefoams, whose trading has been comfortably ahead of both 2009 and market expectations, Kearsey has upgraded his 2010 profit forecast from £3.7 million to £4 million and target price from 110p to 120p.