Broker snap: Nomura downgrades Kingfisher to neutral

19th Sep 2012 13:14

Nomura has this morning downgraded its view on the shares of do-it-yourself retailer Kingfisher to neutral from buy. This as housing starts in France have been declining since the start of the year, which should weigh on Brico's performance, thus creating uncertainty around near-term trading for the business.Furthermore, and across regions, "improvements in discretionary spend have been few, with significant recoveries unexpected near term," the broker says.Due to the above, it downgrades its fiscal year profit before tax (PBT) estimates by circa 7%, and sees downside risk of a further approximately 5%.All it would take for the above to materialize would be a 1% miss to their fiscal year 2014 like-for-like estimates in UK and France, and a 20 basis point miss to their gross margin estimates (neither of which is unimaginable, in their opinion). For all of the aforementioned reasons, and the resulting limited visibility in the near-term, they expect the stock to continue trading below their discounted cash flow (DCF) valuation of 338p. Rather, they believe it will trade more in line with its 12x price-to-earnings multiple, hence their downgrade and the reduction in the price target to 287p from 328p before. AB