Broker snap: Peel Hunt upgrades ASOS to buy

16th Sep 2011 12:50

Following the 25%-plus fall in ASOS's share price over the summer, Peel Hunt has upgraded the fashion retailer from sell to hold and hiked its target price by an optimistic 400p.Peel Hunt attended the ASOS's site visit at its new 500,000 sq ft distribution centre in Barnsley on Thursday, and said that now that the transition is complete, the firm is pursuing a number of efficiencies.Firstly, the warehouse's reclassification as a bonded warehouse will bring a one-off cash flow gain as duty payments on imports become payable on dispatch, not receipt. Also, no duty is payable on imports that are then exported outside the EU, which is usually worth 8-12%. Additionally, certain "mechanisation processes" should cut the cost per order from £1 to 80p."While UK sales are likely to have suffered over Q2, in keeping with the High Street, we expect international to remain impressive," said analyst John Stevenson.The target price is hiked from 1,500p to 1,900p.Despite the positive comments, shares were trading 2.52% lower at 1,740p by 12:50.BC