Interactive Investor

Share price rockets for the new Covid tester on the block

10th September 2020 15:35

Graeme Evans from interactive investor


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TT Electronics is the latest darling of investors as it unveils a 20-second test for coronavirus.

The frenzied buying of stocks with Covid-19 testing or vaccine potential alighted on an unexpected new candidate today in FTSE All-Share stalwart TT Electronics (LSE:TTG).

Shares in the industrial technology group surged 37% to near record highs after it detailed the launch of a screening device able to detect the virus from a saliva swab test within 20 seconds.

TT is the exclusive manufacturing partner for Virolens, which has been developed by Bedfordshire-based start-up iAbra. As the device does not need to be administered by healthcare professionals, it is a potentially ground-breaking tool for airports, offices, sports venues and many other locations where people need to be in close proximity to each other.

TT has already received initial orders worth £2 million for devices and testing cartridges to be delivered to potential launch customers in September and October.

However, iAbra has indicated its intent to purchase further devices and cartridges with associated revenue to TT of about £280 million. This is based on expressions of interest from more than a dozen end customers whose assessment of Virolens is at varying stages.

To highlight the scale of this potential near-term opportunity, City forecasts for the company's revenues in 2020 are currently in the region of £430 million.

The device has completed its first round of testing in partnership with Heathrow Airport, with regulatory approval expected within four to eight weeks. TT will invest £5 million to support manufacturing and the global launch, including at its Hartlepool facility.

TT provides engineered electronics across industries including aerospace, defence and the medical sector. It has three divisions, with its power and connectivity arm involved in the capture and wireless transfer of data. 

It credited its involvement in the Covid-19 project on its ability to develop an idea from concept into a fully functioning machine which can be produced in volume.

Chief executive Richard Tyson said the programme had the potential to deliver a “step change” in TT's organic growth and to speed up hitting its target operating margins.

He added: “This project is evidence of the success of our strategy to position the business in higher technology, structural growth markets, using our engineering expertise to develop products in collaboration with our customers.”

TT, which employs 4,800 people at sites in the US, Europe and Asia, originally listed on the stock market as Tyzack Turner before changing its name to TT Group in 1988 and adopting its current title in 2000.

The shares fell to as low as 20p in 2009 before a recovery to 270p in 2018. They were trading at 261p today. Analysts at Stifel said TT was already an “attractive and undervalued” industrial technology company even before the Virolens development.

They added: “While the range of possible outcomes for this new Covid-related opportunity is very broad, in our view, this development does provide substantial additional option value, and is a development that could provide a major further boost to the investment case.”

Investec Securities added that the launch of Virolens could be the catalyst for a better understanding of the “improved quality and growth outlook” for the group.

A number of other stocks have rocketed in recent months after disclosing their involvement in projects connected to Covid-19 testing or vaccine development. They include Novacyt (LSE:NCYT), Genedrive (LSE:GDR) and Oxford Biomedica (LSE:OXB).

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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