Broker snap: Ocado continues to underperform, says Panmure

15th Jan 2013 10:51

Panmure Gordon continues to label grocery group Ocado as a 'sell', saying that company is still underperforming expectations and its multi-channel competitors.The company said on Tuesday morning that gross sales for the six weeks to January 6th were up 14.2% year-on-year at £91.6m, which Panmure labels as "modest" relative to its peers - recently announced online food growth at Sainsbury, Tesco and Waitrose was 15%, 18% and 37%, respectively.Panmure said: "Ocado needed a fundraising last year in order to avoid a breach of its covenants, but this means that it has the funds to trade for some time. However, that does not mean that the model is suddenly a good one."Sales continue to underperform both City expectations and its multichannel competitors."The broker said that while 'Click & Collect" will gain momentum in online food retailing, Ocado will be unable to deliver on this."Much depends upon February's launch of CFC2 [distribution centre] going to plan, but we think that there is a lot that can go wrong."As for the bid rumours regarding Morrison - Morrison is thought to be interested in the firm to kick-start its online food business - Panmure said that it is unlikely at current prices that the supermarket would launch a bid for Ocado."Ocado's market capitalisation is £487m and its enterprise value is £603m. On top of this, Morrison would have to pay a £40m break clause to Waitrose. We don't think that an investment of this scale would make much sense to Morrison shareholders."The broker has retained its 50p target price for Ocado.BC