Leading shares have drifted lower as the Greek stand-off continues, and ahead of a revision of US growth figures.
But Associated British Foods, hit recently by concerns about its sugar business and the effect of a strong dollar on product buying at its Primark chain, has climbed to a two month high after a boost from Goldman Sachs.
The bank has moved its recommendation from sell straight to buy, saying the shares have underperformed the market by 17% so far this year, and this provides a good entry point.
The bank said it believed Primark’s launch in the US would be a success, and could add £720m to group earnings before interest and tax by 2020:
Our analysis of the US market suggests that Primark’s launch will be a success, particularly with the millennial consumer cohort (around 40% of US versus around 25% of UK/Western Europe), which is large and growing, has more value-oriented shopping habits, and prefers fast fashion.
We expect the [September] launch of the Primark store in Downtown Crossing, Boston, to provide a catalyst re-focusing investors on the Primark long-term growth story following near-term negative sentiment around sugar and dollar sourcing. We also expect any commentary at the interim managment statement (July 9) regarding strong performances at Primark, confidence in the US launch and stabilization in other businesses, to be taken positively.
The upgrade has lifted ABF shares by 87p or nearly 3% to £30.37.
But overall the FTSE 100 has fallen 30.40 points to 7010.52 as meetings between Greece and its creditors continue ahead of next week’s deadline for another repayment to the International Monetary Fund. Differing views about whether a deal will be reached this weekend, not to mention the IMF’s Christine Lagarde talking about a possible Greek exit from the eurozone, have put investors on edge once more.
There is also the matter of US GDP figures later, which will be studied for hints about the timing of the next rate rise from the Federal Reserve (September seems favourite at the moment.)
Among the fallers, equipment hire group Ashtead has declined another 12p to £11.49 after Thursday’s downbeat comments from US peer United Rentals.
But Weir, which supplies pumping equipment to the oil industry, continued its volatile week, this time up 54p to £20.20 as Credit Suisse raised its target price from £19.15 to £22.05.
Among the mid-caps Ophir Energy has added 6.2p to 133.4p after Barclays moved from equal weight to overweight with a target price lifted from 200p to 225p. The bank said:
After reviewing our valuation of Ophir’s Equatorial Guinea Block R FLNG project, we upgrade our rating on Ophir to overweight with an increased 225p price target (from 200p). Offering potential upside of around 75% versus the peer group average of around 40%, we also make Ophir our top pick for the industry.
We believe recent stock price weakness (down 25% in the last month, versus the peer group down 15%) combined with significant progress in Equatorial Guinea provides an attractive opportunity to revisit the Ophir investment case. In addition to seeing upside to the Block R development concept, we believe Ophir is well positioned to take advantage of declining industry costs and continues to have a very strong balance sheet with first half estimated net cash of around $600m.
