RBC upgrades Electrocomponents on improvement potential

(ShareCast News) - RBC Capital Markets upgraded Electrocomponents to 'sector perform' from 'underperform' and lifted the price target to 270p from 185p, saying downside is limited.The Canadian bank pointed out that full-year results were around 3% ahead of its forecasts, with a better performance on cost savings.It also said cash flow was better, with a good working capital, while it was encouraging to see second-half earnings before interest, tax and amortisation margin was up 70 basis points."It is now becoming clear how poorly this business has been run for a long period of time and hence how big the opportunity is regarding improving sales and reducing costs," said RBC, adding that the new management team has a firm grasp of the group's problems and there is significant improvement potential.RBC argued that while the stock has performed well, there is still potential. It noted Electrocomponents shares outperformed the FTSE 100 by 34% over the last 12 months."Headline multiples are expensive - 16E PE 19.5x and EV/EBITA 15.5x, but the dividend yield is supportive at 4.2%," RBC said.At 1100 BST, Electrocomponents shares were up 2.7% to 290.20p.