Broker snap: Deutsche Bank sees no revolution at Travis Perkins

4th Dec 2013 11:04

Although it lifted its price target from 1,413p to 1,592p, Deutsche Bank was somewhat disappointed with the capital markets day from Travis Perkins (TPK), with no mention of a hoped-for cash return and further fuel for market worries for the General Merchanting division. Despite a confident performance from new management, analyst Glynis Johnson bemoaned the lack of "revolution" and said new targets for return on capital employed implied little movement to forecasts. "[Travis Perkins] remains a well-run, well-positioned business. However, with margin upside in its largest division guided to be constrained and increased pressure from fixed price retailers we see more limited scope for earnings upgrades," she said.Trading at over 12.5 times 2015 earnings, she saw limited value in the stock and reiterated her 'hold' recommendation.New Chief Executive John Carter guided to retaining sector-leading margins in its General Merchanting business but no margin expansion, which the analyst said she believed would leave the market disappointed by the lack of operational leverage this implies for this the group's main business, and concerns over the impact on pricing competition from fixed price retailers such as trade DIY and multi-channel competitors on its smaller-customer base. Shares in the company bounced 1.2% to 1,743.68p, having fallen 3.3% the day before.OH