Bought too dear without enough research. Bought cheaper earlier and sold at a profit. We can't win them all, but need to be more careful at times...or all the time? Have they gone up as far as they can go for now?

Friday March 16, 12:40 PM
Broker tips: HMV, Pennon, Tesco, Charter

LONDON (ShareCast)

Supermarket titan Tesco (TEO.TO - news) was up a little thanks to a Dresdner Kleinwort upgrade to 'add' from 'hold', with price target lifted to 460p from 425p.

The broker notes that the group's share price has underperformed its European and UK peers so far this year.

These recent broker views are worth a re-read.


06-02-2007
shares in Tesco were firmer in early deals after UBS raised its price targets to 550 pence from 470, dealers said. UBS said it believed investors were starting to value the food retail sector using the PropCo/OpCo methodology, which involves splitting the businesses into property company (PropCo) and the underlying operating business (OpCo) and valuing them separately. It said the new valuations have been prompted by recent private equity interest and increasing property prices in the UK. It said that by using this methodology, Tesco has an estimated 22.7 bln stg of freehold assets which leaves the operating company (OpCo) trading at 10.2 bln stg which, when applying a 5% rental yield, values the business at 8 times price earnings to February 2008. It said Tescos OpCo generates a low EBIT margin of around 4 pct, but stronger profit growth of 14%.


14-02-2007
target price increased to 500 pence from 400 pence by Credit Suisse as the broker said the groups US west-coast roll-out could mark the start of bigger expansion and sustain the groups profile, dealers said. In an upbeat note published this morning, Credit Suisse argued that although the US expansion is unlikely to transform Tescos near-term profit & loss account, it could provide numerous opportunities for growth if successful. The broker believes that sustaining the groups rapid growth profile of the last ten years for another ten now seems a realistic, rather than upbeat, scenario. Credit Suisse noted the stock boasts unique growth visibility among European food retailers.


14-03-2007
SG Securities raised its stance on the supermarket giant to buy from hold and pegged its price target at 490 pence, saying that Tesco could benefit from a re-jigged property portfolio and sector valuation. In a note to clients, SG securities said the supermarket chain might make the most out of its property portfolio through advantageous interest rates, leveraging its British property portfolio and investing in cheap freeholds overseas. The advantages to the retailer are that it can keep a freehold level of more than 80% and retain a comfortable level of asset control, while cashing in on an excellent growth rate. The main threat, according to the brokerage, is that a bid for rival Sainsbury will fail to materialise and that valuation in the sector would thus overlook Tescos adjusted property balance. Bid or no bid, however, the property upside that Tesco can benefit from, will remain and make Tesco look very price-competitive in respect to its competitors, the brokerage added.


16-03-2007
upgraded to add from hold by Dresdner Kleinwort with an increased target price of 460 pence, up from 425 on valuation grounds, according to dealers. In a note landing on fund managers desks today, the broker noted that Tesco shares have strongly lagged both their European and UK peers so far this year. Dresdner Kleinwort pointed out that the market is increasingly discounting a takeover of Sainsbury PLC, and as importantly, Carrefour SA moving towards a re-leveraging of its capital structure, with potentially, a reduced appetite for physical growth. The broker said in both cases the potential benefits to Tescos investment case are obvious.