Canaccord Genuity upgrades Volex to 'buy'

(Sharecast News) - Analysts at Canaccord Genuity upgraded Volex to 'buy' from 'hold' on Tuesday, saying the shares now offered around 18% upside to its new 600p target price after pulling back from June highs.

Canaccord Genuity lifted its forecasts following Volex's move to take full ownership of Kepler SignalTek, alongside a reduction in the group's share buyback from �40m to �20m to preserve M&A flexibility. Canaccord said acquiring the remaining 64.3% of KST for up to $89.4m looked a "sensible, derisked and capabilityled" deal that extends Volex's medical offering into patientconnected products, with margins ahead of the group and expected to clear the firm's more than 15% return on capital expended hurdle within two years.

The Canadian bank highlighted the deal's crossselling potential given limited customer overlap, and said Volex's bluechip healthcare relationships should accelerate growth. The deal will be funded through existing facilities, taking proforma leverage to around 1.1x. It also noted Volex's decision to scale back its buyback ahead of its move to the Main Market on 24 July.

Canaccord, which nudged its target price on the stock up from 590p to 600p, raised its adjusted operating profits forecasts by 5 to 6% across FY27-29, assuming 10% KST revenue growth and a 15% margin. Net bank debt was now expected to rise to about �215m in FY27, with leverage easing to 1.0x by FY29.

Canaccord said Volex's valuation at a roughly 15x CY27 price-to-earnings ratio and a 9x enterprise value-to-underlying earnings ratio remained below peer medians, and reiterated its view that the stock's strategy and growth track record justified its upgraded stance.

Reporting by Iain Gilbert at Sharecast.com