Broker snap: Kingfisher not fulfilling potential

22nd Jul 2010 12:56

There was not much in Kingfisher's trading statement to suggest there will be a change to consensus estimates for the current fiscal year, according to Singer Capital Markets.Singer is going for full year profit before tax of £646m, slightly higher than market consensus of £639m. "Prior to speaking to management, we would expect these figures to remain unchanged today given the comments about meeting first half expectations. There are likely to be changes in the mix though given the contrasting performances in the UK and France," the broker notes.In the UK, sales at B&Q were down 4.3% on a like for like (LFL) basis in the 10 weeks to 10 July, having been down 2.8% in the company's first quarter/ Singer had expected broadly flat LFL sales in the second quarter.Overall the UK saw sales fall by 3.6% (-4.4% LFL) across the second quarter. This leaves the UK down 3.5% LFL across the first 23 weeks of the year, the broker noted.In France, second quarter sales were up 2.6% LFL, compared to 0.2% growth in the first quarter, and were ahead by 3.9% in total. "Combined, we expected French Q2 LFL sales to be up by c.0.4%," the broker said. Singer currently has its "fair value" recommendation on the shares under review. "The stock trades on a PER [price/earnings ratio] of 11.3x to Jan'11 or 5.4x EV/EBITDA [enterprise value/earnings before interest, tax, depreciation and amortisation] . This still includes losses from China and the business remains under-potentialised in terms of earnings from its developing territories," the broker maintains.