Broker snap: TT to break even this year

20th Aug 2009 09:29

House broker KBC Peel Hunt has upgraded its 2010 earnings estimates for TT Electronics after the sensor and electronic component technology firm announced interim results that were ahead of expectations.‘We are upgrading our 2010E PBT by £4.5m to £6.9m as additional cost savings are realised next year, including the anticipated elimination of the loss-making AB Automotive business. Net debt is forecast to fall to circa £90m by end-2009E, comfortably within existing facilities and covenants,’ the broker said.KBC believes its upgrades are justified on the basis of further cost savings alone and are not dependent on a recovery in trading conditions. Assuming no recovery in volumes in the second half of the year KBC expects TT to break even in the current year.The company is placing greater emphasis on high margin products in niche markets and once its transformation is complete the shares could move sharply higher, the broker believes.Regarding trading conditions, there is no sign at present of a recovery and visibility remains limited as customers cut lead times on orders. On the plus side, conditions do seem to be stabilising in those markets ‘hardest hit by de-stocking and the group has traded profitably, at the EBIT level, since May.’KBC rates the shares a ‘buy’ and has a target price of 78p.