AB Foods initiated at 'buy' by HSBC on Primark US launch

5th Jun 2015 08:11

HSBC initiated coverage of Associated British Foods at 'buy' with a 3,680p price target, pointing to the growth potential of Primark."Primark's entry into the US could herald a much faster roll-out of space than has been seen in Europe," said HSBC. It expects AB Foods' EPS to rise by 97% in the five years from 2015, driven by Primark's international expansion."Primark's profits have increased 13 fold since 2000 to a forecast £693m in 2015, yet in many ways we see Primark now at its most interesting stage of development," said HSBC.The broker noted that in Europe, Primark has met with significant success in each country it has entered yet its roll-out is just beginning, with just 16 stores in Germany and only five in France.A central part of the bank's thesis is that Primark will expand more quickly in the US than it has in Europe because of the ready availability of suitable space."Its Autumn launch in the US with a pipeline of attractive stores could, if successful, herald a much faster roll-out of space, with Sears looking like it has enough spare, high quality space to keep Primark busy for years," it said.Primark makes up over 80% of the value of HSBC's 3,680p price target.