Broker snap: Dunelm upgraded on store growth potential

29th Mar 2011 11:00

UBS upgrades Dunelm to a 'buy', from 'neutral', saying that the homeware retailer's store growth is undervalued.The group has the fastest store growth forecast in the sector, with high single digit space growth per annum forecast for the medium term, according to the broker."We calculate that this self-funded expansion plan could deliver a pre-tax internal rate of return per new store of just over 50%, and implies an enterprise value upside of 33% (£270m) if a mid-term forecast of eight new store per annum is achieved," the broker said."Dunelm is already a popular destination store for homewares, and recent product and services developments have enhanced its competitive position in our view."The target price of 500p is retained.BC