Broker snap: Buy Sainsbury on the dips

17th Jun 2009 13:03

Sainsbury's fund raising plans knocked the share price for six on Wednesday morning but broker Charles Stanley believes the supermarket chain's plan to accelerate expansion plans is a sensible strategic move.'Management believes now is a particularly good time to be accelerating space growth, given attractive opportunities in the property market and reduced build / fit-out costs. The capital raising and acceleration of space growth is expected to be mildly earnings dilutive in the current financial year and 2010/11 due to additional interest costs on the convertible and store pre-opening costs,' Charles Stanley analyst Sam Hart said. Hart reckons some small earnings downgrades may occur as a result of the capital raising, and this may result in share price weakness which investors should take advantage of, given the 'undemanding' valuation of the shares which is 'underpinned at current levels by asset backing arguments.'