Broker snap: Growth potential at AB Foods

22nd Feb 2010 12:45

British Sugar and Primark owner Associated British Foods (ABF) is an unusual beast, in Panmure Gordon's opinion, in that it is a defensive stock that also offers strong profits growth.ABF's performance in the first half of its financial year was impressive, the broker reckons, though having lifted its full year earnings forecasts last month by 6% Panmure Gordon will not be revising its full year forecasts yet, though it thinks 'the risks to forecasts remain on the upside.''Although the shares have performed strongly this year, we believe a rating of 14.4x PE [price earnings ratio] and 7.5x EV/EBITDA [enterprise value/earnings before interest, tax, depreciation and amortisation] for calendar 2010E [2010 estimates] remains attractive given the growth potential of the group over the coming years, driven in particular by Primark's transformation into a truly Pan-European retailer,' Panmure Gordon concludes.The broker has reiterated its 'buy' recommendation and 1010p target price.