Primark owner Associated British Foods (LON:ABF) is all bought up, according to UBS, which today cuts its recommendation to ‘neutral’.
Analyst Sophie Hughes says Primark’s upcoming launch in the United States is critical to the share’s investment thesis, and the current market value already prices in success both in America and Europe.
Hughes estimates the US venture could add up to £345mln to annual sales, about 15% of the company’s current value, though this assumes that it manages to capture a 1% market share over a seven year period.
“If the US stores debut as strongly as in Germany/ France, management indicates that it will be looking at ways of rolling the model out nationally, which could in theory be relatively easy to achieve if Primark continued to use the Sears platform (Sears have c. 1700 stores in the US),” Hughes said in a note.
“However, we wait for some tangible data points from the US before concluding that a national roll-out is imminent.”
Whilst the analyst at the moment doesn’t see much upside, neither does she see a great deal of risk if the American launch fails.
Elsewhere at UBS, Michael Briest recommended newly listed software group Sophos (LONLSOPH) as a ‘buy’ with a 300p target price.
The digital security group is likely to participate in the consolidation of a fragmented sector following last month’s US100mln IPO.
Legal & General (LON:LGEN) had its price target raised to 310p from 290p by Berenberg after the financial services group released expectation beating interim results.
Berenberg’s Matthew Preston said the interims reaffirmed his belief that L&G is well positioned when it comes to taking market share and delivering longer-term growth.
Ukraine based iron ore firm Ferrexpo (LON:FXPO) was upgraded by Deutsche Bank, which said this week’s first half results ‘showed the group’s true mettle’.
At US$176mln the metal producer’s earnings were ahead of Deutsche’s forecast of US$167mln. The German bank also pointed to Ferrexpo’s lower capex and debt reduction whilst describing it as a ‘solid result’.
Deutsche lifted its target price to 200p from 195p, and repeated a ‘buy’ recommendation.
Whilst travel and holidays group TUI (LON:TUIT) has had its price target cut to 1235p from 1600p the German Bank has kept a towel on the TUI sun lounger; its ‘buy’ recommendation remains.
Jefferies had upgraded Poundland (LON:PLND) to ‘buy’, as it expects provisional findings from the UK’s Competition and Markets Authority probe will see a re-rating of the fixed-price retailer’s shares in anticipation that a deal with 99p Stores can be concluded.
The broker’s target rises to 400p from 260p.