RE: IC article29 Nov 2024 11:29
Although this sounds impressive, TT’s share price had fallen by 32 per cent in a single day in September on the back of a profit warning. The shares had been trading as high as 170p as recently as August.
Moreover, the decline in Volex’s share price (and the subsequent jump in TT’s share price) has narrowed that premium to just 18 per cent, based on Friday’s closing prices.
Although Berenberg analysts lack faith in TT management’s ability to deliver the double-digit adjusted operating margin within the next 18 months, they said that a 135.5p offer valued TT at an enterprise value of just 6.5 times forecast cash profit for 2025, falling to 4.7 times for 2026. This compares with a five-year average of 10.9 times, according to FactSet.
Others also place faith in TT’s recov- ery, with Mark Fielding of RBC Capital Markets describing the group’s current woes as more cyclical than structural. Although it has operational issues, it has been battling with a weakness in end markets that has affected the broader industrial sector, he argued.
“We expect a cyclical uplift as we move through 2025 and there are plans in place to resolve the opera- tional issues,” he said.