Volex has done a great job delivering its strategic targets over the last five years, and with the next five laid out at the CMD in April the business looks well positioned. However, from a valuation perspective, the market has now acknowledged this with a deserved rerating. The PE sits above 20x, in line with an in-vogue subsector, and well ahead of its 5yr historic average of 12.9x. Whilst the trading outlook remains positive, we think it will need to be very strong (much stronger than the CMD targets implied) to drive the rating materially higher still. Adding to the debate in the near term is the transition from AIM to the main market and the effect that could have on trading weighing up the forced IHT sellers against the buyback programme, before any index-trackers buying on entry into the FTSE250 if it achieves that in September. With the shares up over 110% relative to the market in the last 12 months, we think they have reached fair value. Our 610p TP remains unchanged but our recommendation moves to Hold from Buy.
