Broker snap: Centrica to win the home services race

8th Sep 2010 11:32

Nomura Securities has issued a 'buy' note on British Gas-owner Centrica, and believes the market is undervaluing the group's prospects in the rapidly developing UK home services market. "In conjunction with Delta Energy and Environment we have carried out an in-depth review of the Home Services market in the UK. We conclude that Centrica's Home Services division is well placed to at least meet internal targets of nearly doubling EBIT [earnings before interest and tax] by end-2012," Nomura analyst John Musk revealed.As a result of its research the broker has upped its valuation of the enterprise value of Centrica's Home Services division to £5.4bn from £3.3bn previously. Market consensus is £3.1bn, Nomura states."In our view, Centrica is well positioned to capitalise on the rapidly developing energy services market through its scale in energy supply and its brand, its expertise and its broad and innovative home services offerings," Musk said.The company has other competitive strengths, too. "We also believe Centrica has a sustainable advantage in supply that will sustain market-leading margins. We see growth in the US, Business Supply and Upstream EBIT as well as a strong balance sheet and limited political/macro risk," Nomura concluded.The broker has a 410p target price for the stock.