Broker snap: Electrocomponents is cheap, says Singer

14th Nov 2011 12:01

Singer Capital Markets has reiterated its fair value rating and 284p target for Electrocomponents but has highlighted some positives at the electronic components distributor, such as its cheap valuation.While the company saw revenues growth slow from 14% in the first quarter to 8% in the second, this had already been flagged at the end of September. The broker notes that while the stock has fallen 12% over the last year, a sharper operational focus meant that the company outperformed its closest peer Premier Farnell, which fell 38%. "This has depressed its price-to-earnings [multiple] which has fallen to 10x on current earnings. Electrocomponents rarely trades more cheaply than it does currently," said analyst Andy Murphy."Investors should consider the longer game where holdings could be built up in this fallow period and would benefit from the 6.2% yield. Although the dividend was cut in the last recession, there were mitigating reasons for it and we do not believe these will recur," Murphy said.By midday on Monday, shares were down 0.05% at 208.3p.BC