Broker snap: JPM sees value in Morrisons

2nd Feb 2010 09:52

Morrisons has come a long way since it bought rival supermarket Safeway, said the broker JP Morgan as it lifted its rating on the stock to 'overweight' from 'neutral', upping the target price to 340p from 320p.It is now three times the size and its food sales density, a measure of how much is sold per square foot, is now just 10% short of sector leader Tesco's, compared with 25% before the Safeway purchase.Morrisons took over Safeway in 2004.Margins are still low at Morrisons in comparison with its own historical standards and Tesco, JPM notes, adding that it expects these to improve.It notes that Morrisons trades at discount to Tesco and Sainsbury's due to concerns over the chief executive, which it thinks are overblown.Morrisons lost its highly-rated chief executive Marc Bolland to Marks & Spencer last year and has replaced him with Dalton Philips, who has worked with the Canadian retail giant Loblaw and the US's Wal-Mart.