The Investment Column: Sainsbury's shares are cheap but should still be left at the checkout

COMING JUST a few weeks after its quarterly trading statement, no one was expecting much from yesterday's half-year figures from Sainsbury's. But as only Sainsbury's can, the company still managed to leave a sour taste in City mouths after a briefing by analysts degenerated into a confrontation, which briefly forced the shares to an eight-year low.

The problem is the City does not believe the re-shaped management team is the right one to turn this business around. David Bremner may be taking charge of the core supermarket business leaving Dino Adriano as group chief executive. Until further changes are made, analysts say, the shares are dead money. This is quite something given that at 319.5p, unchanged yesterday, the shares are cheap by any measure. If you strip out Homebase and the US business, Sainsbury's market value is only twice that of William Morrison, a regional player with a fraction of Sainsbury's sales. Assuming full-year profits of pounds 615m, the shares trade on a forward multiple of 14 compared to Tesco's 17.5, a discount of 20 per cent.

The problem is it is hard to see when and how a change in sentiment will start. Sainsbury's talks about how well some of its peripheral businesses are doing such as Homebase and Sainsbury's Bank, but these are sideshows. The only thing that matters is the core supermarkets business and here the group continues to labour in a market made even more cut-throat by Wal-Mart's purchase of Asda. Like-for-like sales are down by 1.3 per cent and even if Mr Adriano does achieve his target of achieving sales growth by the year end this is hardly value to shout about.

The company makes a lot of its e-business strategy but at pounds 30m the initial investment looks expensive. Tesco, which will have a nationwide Internet service by next year probably cannot believe how much of a head start it is being given. So while the shares may look cheap, they could become cheaper still until there is fresh impetus at the top. Avoid for now.