This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
Supermarkets page 2
WM Morrison (MRW)
M&A deals continue to pop-up with predators making the most of a low interest rate environment and discounted valuations and it was most recently the turn of middle-of-the-road WM Morrison (MRW) to attract attention as a potential candidate for acquisition after South African billionaire Christo Wiese, whose $25bn investment vehicle recently bagged a 19% stake in grocery chain Iceland (as well as stakes in New Look and Virgin Active), said he was interested in the UK’s supermarket sector and had a billion or so left to deploy. A continental supermarket deal between Dutch Ahold (AMS) and Belgian Delhaize (DELB) has also focussed the spotlight this year.
Short Interest: 12.57% (source: Short Tracker; 16 Sept)
MRW closing prices, daily
Will the price head up towards 24-month highs 300p, or, will it fall back towards lows of 152p?
Broker Consensus: 26% Buy, 35% Hold, 39% Sell
Most Bullish: Nomura, Buy, Target 280p, +77%
Consensus: Target 178p, +12%
Most Bearish: Bernstein, sell, Target 140p, -12%
NB: All pricing and consensus data from Bloomberg on 16 Sept; Consensus breakdown available on request
Tesco (TSCO)
An already heavily discounted $15.1bn price tag on Tesco (TSCO) puts it beyond the reach of South Africa’s Mr. Wiese for now, but the company is in the midst of major restructuring to cut its £22bn debt-ridden balance sheet by selling major assets. While this has thus far proven a thorn in ‘drastic’ Dave Lewis’ side, the £4bn offloading of South Korean Homeplus confirmed in late August will be welcomed by shareholders. The turnaround from the woes that began in 2014 has been slow at picking up, but could a long awaited sale of Tesco’sDunnhumby data unit (which runs Clubcard) confirm a turning point that attracts fresh investors to the stock?
Short Interest: 0.70% (source: Short Tracker; 16 Sept)
TSCO closing prices, daily
Will the price bounce up towards 27-month highs 385p or will it pull back beneath lows of 165p?
Broker Consensus: 37.5% Buy, 37.5% Hold, 25% Sell
Most Bullish: HSBC, Buy, Target 295p, +65%
Consensus: Target 217p, +21%
Most Bearish: JPMorgan, Underweight, Target 150p, -16%
NB: All pricing and consensus data from Bloomberg on 16 Sept; Consensus breakdown available on request
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Prepared by Michael van Dulken, Head of Research
