Wednesday 28 April 1999
The fall in Kingfisher's price since the merger with Asda was announced reflects a basic misunderstanding of the medium term benefits, reckons Investec Henderson Crosthwaite, which ranks the shares (746p) a strong buy. The deal would also enhance Kingfisher's earnings 14 per cent to around 36p, putting the shares on a multiple of less than 21 times (compared with 28 times before the news). The broker reckons Wal-Mart is more interested in Continental expansion, especially in Germany, while a rival bid from Europe is also seen as unlikely. For those who carp about Kingfisher buying into a lower-growth and lower-rated food company, the derating has already taken place.
Buy Handover International (116p), a small, emerging four-star hotel company, which is set for steady expansion over the next few years, says Teather & Greenwood. The shares do look very undervalued, with the company's net asset value per share of 226p well ahead of the price.
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