Broker snap: KBC likes the look of Lookers

19th Aug 2009 11:31

Interim pre-tax profits from car dealer Lookers came in ahead of KBC Peel Hunt's expectations, prompting the broker to upgrade its full-year profit forecast by 43%.Lookers reported half-year profit before tax of £17.6m, £1.3m higher than KBC had been expecting. The broker is now forecasting full-year pre-tax profits of £24.6m, while next year's profit forecast has been ramped up 10% to £29.7m.'We had originally anticipated the UK used car market would lose momentum in the second half of the year, as prices have recovered. However, our prudent assumptions for both used car sales and the level of new car registrations have proved to be overly cautious, with demand in current trading remaining strong,' the broker said, explaining its hefty profit forecast upgrades.'Our new estimates still imply a slowdown in used car sales against weaker comparatives and so we still see scope for further upgrade potential at future trading updates. The closure of 21 loss-making showrooms, a companywide pay freeze and headcount reductions have underpinned a £10m drop in yoy [year-on-year] operating costs in H1 [first half],' the broker notes.KBC Peel Hunt has a 'buy' recommendation on the stock and has lifted its price target to 80p from 65p.