Broker snap: Morrisons trading at 'unjustified' discount

6th Sep 2012 10:53

Supermarket group Morrisons is trading at an 'unjustified' discount to its peers, according to Jefferies which was maintained its 'buy' rating and 350p target price on the stock after the firm's strong set of interim results.Morrisons reported a pre-tax profit of £445m in the first half, 3% higher than the Jefferies (and consensus) forecast of £433m. The broker said that a strong performance on savings and vertical integration offset the anticipated headwinds for like-for-like (LFL) sales which declined by 0.9% (excluding fuel).Jefferies is expected a full-year pre-tax profit of £936m (or £961m on a 53-week basis).Morrisons is trading at nine times prospective earnings which equates to a 10% discount to its UK supermarket peers and a 20% discount to the pan-European sector."This ignores industry leading returns, self-help opportunities, lower leverage and higher property ownership. We expect improving relative LFL and market share performance to be an important catalyst to correct that valuation inefficiency in the next six months (and especially in Q4)."By 10:53 on Thursday, shares were up 3.22% at 289.75p.BC