Proactive Investors - Run By Investors For Investors

Broker Round-up: Sainsbury’s, Tesco, Associated British Foods, SuperDry, Glencore, Xstrata

Broker Round-up: Sainsbury’s, Tesco, Associated British Foods, SuperDry, Glencore, Xstrata


Sainsbury’s (LON:SBRY) is the only supermarket stock worth owning.

That’s the view of food retail analysts at Morgan Stanley, who would rather go hungry than buy shares in the sector.

Analyst Edouard Aubin has ‘underweight’ ratings out on Britain’s biggest supermarket Tesco (LON:TSCO), as well as Morrisons (LON:MRW), the third biggest of the UK-listed grocers.

Aubin reckons the space race is not over for the food retailers, with the battle still on to boost capacity to sell more stock.

He notes that last year some hinted at an end to the fight for bigger supermarkets, but while Tesco said it was cutting its selling space, it turned out this was in the clothing aisles rather than the food sections.

“Given a still healthy expansion at competitors Sainsbury and Morrisons - not to mention Aldi or Lidl - we calculate that the ten largest grocers will grow their grocery selling space by c.+4% on aggregate in both calendar 2013 and 2014, far higher than most other European markets, and likely far higher than grocery volumes,” the analyst said.

“Overall, we view the UK food retail sector as unattractive, with the exception of Sainsbury, which we rate as Overweight given its differentiated strategy,” he added.

Oriel Securities’ analysts, however, prefer Tesco, calling it the best mid-term pick in the sector.

Tesco is a core holding but material upside from 385p is unlikely whilst LFL remains becalmed,” says analyst Jonathan Pritchard.

Sainsbury’s now prices in solid delivery of forecasts and market share gains, so upside is capped. There’s progress from Morrisons on some counts but lack of LFL momentum will hold that one back too.”

Credit Suisse would now hold on to shares in Associated British Foods (LON:ABF), having advised its clients before to buy them.

It is time, though, for a pause for breath despite the long-term story still looking “very good”. Primark profit growth looks strong, but the broker doubts whether the knock-off clothing chain can keep up the impressive like-for-like sales seen in the first half of the year.

Credit Suisse’s price target rises to £18.50 from £16.50.

Canaccord Genuity just can’t get enough of SuperDry brand owner SuperGroup (LON:SGP).

The fashion company has just ploughed £5mln into a new giant distribution centre, which Canaccord hailed as “hugely significant”.

“There are a number of key points but none more than the size of the facility suggests that SuperGroup’s growth ambitions far exceed our forecasts,” the City firm said.

The deal to tie up Glencore (LON:GLEN) and Xstrata (LON:XTA) is all but done, according to UBS analysts, as the duo wait on approval from China to create the world’s biggest mining group.

Today, the broker added them to its ‘key calls’ list. The market could be underestimating the ‘Glasenberg factor’, said analyst Myles Allsop, referring to the Glencore chief executive Ivan Glasenberg.

Liberum Capital tipped Vodafone (LON:VOD) shares to dial up as it stuck by its ‘buy’ recommendation and 210p target price on the mobile phone giant.

The City broker believes prospects for European mobile consolidation are improving, with mobile valuations stabilising in Europe.

“Further significant upside now requires either firm developments around European mobile consolidation or a knock out bid for the Verizon Wireless stake.”

Neither is implausible in Liberum’s view.

Citigroup tipsters see Peroni and Grolsch brewer SABMiller’s (LON:SAB) sales growth slipping to just 4% in its upcoming quarterly numbers. But Morgan Stanley says take no notice, as it claims the brewer’s sales growth will hit 7%.


Register here to be notified of future ADM-A Company articles

No investment advice: The Company is a publisher and is not registered with or authorised by the Financial Services Authority (FSA). You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter. You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate. From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2017

Proactive Investor UK Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use