ShoreCap reiterates 'buy' on ABF, highlights push into US
By Alexander Bueso
Date: Thursday 04 Jul 2019
(Sharecast News) - ShoreCap reiterated its 'buy' stance on shares of Associated British Foods on Thursday after the company reiterated guidance for full-year earnings per share to be in line with that of a year ago, highlighting its returns on capital and ability to throw off cash and arguing that its push into the US was not reflected in the share price.
They also highlighted the shares' "attractive" valuation.
On their analysts' estimates, the food ingredients manufacturer and discount fashion retailer was set to deliver full year EPS of 134.7p in 2019, resulting in a price-to-earnings multiple of 18.3 times, falling to 16.2 in the 2020 financial year.
Its enterprise value-to-earnings before interest, depreciation and taxes multiple meanwhile was pegged at 9.3 times, falling to 8.3 times in 2020.
The broker labelled that as "attractive for a high-quality set of assets that consistently generate high teens/low twenty percent ROCE and strong annual cash generation."
On the back of ABF's latest trading update, the analysts surmised that like-for-like growth in the Eurozone at Primark likely returned to positive in May and said US LFL growth was "encouraging", hailing the company's moves to open new stores in the states New Jersey, Florida and Chicago.
"We view such expansion as further evidence of Primark's growing selfconfidence in the US, an opportunity we do not believe is being reflected in ABF's valuation."
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