Market Report: Superstore ratings help Asda to a new high
Thursday 09 April 1998
Analyst Andrew Fowler, formerly with UBS, now researching for Morgan Stanley, described Asda as a "strong buy", setting a 240p target. The shares rose 6.75p to 210p.
He was also positive on Tesco and Iceland; Safeway was rated as an under- performer and J Sainsbury given a neutral rating.
The industry-wide review represented Mr Fowler's debut in Morgan Stanley colours. Tesco enjoyed a long relationship with UBS but when the Swiss group merged with the Swiss Banking Corporation (SBC Warburg), which represents Sainsbury, Tesco decided to seek new stockbrokers. It picked NatWest Securities and Morgan Stanley, which recruited Mr Fowler, who had dealt with Tesco for years.
On Asda he says: "It appears to be beleaguered by a host of overdone stories of weak trading. We think Asda has like-for-like sales growth 3 per cent faster than the nearest Footsie rival (Tesco)".
Mr Leighton's contribution was at a conference organised by Dresdner Kleinwort Benson. Apparently he told DKB salesmen and fund managers that worries about clothing sales, prompted by the surprise profits warning from Next, were unfounded.
Iceland was also thought to have made encouraging comments to DKB. The frozen food chain was unchanged at 208.5p; Safeway, still regarded as a possible Asda target, fell 13.5p to 369.5p and Tesco, with additional support from NatWest Securities, put on 8p to 578p. Sainsbury was a shade off at 517p.
The supermarket activity was in sharp contrast to the rest of the stock market. The interest rate deliberations, a mixed New York display and a tendency to sit on the sidelines ahead of the long Easter holiday combined to produce a featureless performance, although turnover, above 1 billion shares, was impressive.
Big trades in BTR, little changed at 195.5p, Centrica and Signet, where Goldman Sachs was active, helped balloon volume.
British Steel was the best performing blue chip. Sterling's modest retreat and, no doubt, the decision to split the chairman and chief executive roles provided a 5.75p uplift to 144.75p.
Granada improved 35p to 1,065p as profit forecasts were raised following the Savoy hotel take over; Capital Radio hardened 11.5p to 730p on bid talk.
Financials continued to draw strength from the Citicorp/Travelers merger. HSBC, supported by Hong Kong rumours of a major deal and firm Far Eastern markets, rose 65p to 1,952p; Standard Chartered put on 19p to 944p and Perpetual, the fund manager, added 220p to 4,135p.
Zeneca lost 41p to 2,715p; Merrill Lynch moved its short-term recommendation to neutral and Salomon Smith Barney suggested profits should be taken.
Enterprise Oil jumped 11p to 536p on rumours it was about to produce an encouraging drilling report. Cairn Energy weakened 19.5p to 351p, seemingly on the lack of developments in Bangladesh; the market has for months expected an announcement that Cairn has clinched some lucrative deals. There was talk of 1.5 million shares on offer.
London Clubs International, the gaming group, eased 5p to 176p following a downbeat trading statement and Thorn, the rental group, slipped 21.5p to 200p as profit-takers took advantage of Tuesday's bid-approach inspired gain.
Great Universal Stores' higher offer (650p) for Argos left the target 2p firmer at 639p. Takeover action continued on the under card. Property group Barlows firmed 2p to 61.5p after it revealed a possible 59p share exchange offer; Whitecross, a dentist, opened 15p wider to 144.5p as its management lifted its cash offer to 150p and picked up a 40.8 per cent stake. A signalled counter bid now seems unlikely.
JJB Sports had another torrid session, off a further 36.5p to 582p; earlier this year the shares touched 822.5p. With sports sales tailing off the market has becoming increasingly uneasy about JJB's results, due soon.
PGA European Tour Courses held at 38.5p as Club Corporation International tightened its grip. It has picked up another 7 per cent, taking its stake to 29.9 per cent. Last week CCI, which runs golf courses and country clubs in the US, picked up around 23 per cent from Richard Thompson, former chairman of Queens Park Rangers FC.
Pawnbroker Albemarle & Bond moved forward 7p to 69.5p. It is meeting Ezcorp, the US group which has bought a 29.9 per cent stake, in New York on Easter Monday.
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