Broker snap: Seymour Pierce ups Burberry target ahead of first-half results

2nd Nov 2012 10:36

Seymour Pierce has raised its target price and maintained its 'buy' rating for luxury brand Burberry ahead of the group's first-half results on November 7th.The firm reassured on October 11th that the second quarter had ended more strongly, saying that the material sales slowdown, evidenced from its unscheduled trading update in September, "was industry wide rather than anything Burberry specific", said Seymour analyst Kate Calvert."From H1 results, we are looking for: more detail on the bringing in-house of the Interparfums' fragrance and cosmetic license from 1 April 2013; an update on global demand, particularly China; and an understanding of what investment has been put on hold and what has not," Calvert said.Seymour Pierce expects no change to management guidance: second-half average retail space expected to increase by 14%; second-half underlying wholesale revenues to be broadly flat; full-year licensing revenues more or less unchanged; and full-year capital capital expenditure of £180-200m.The broker estimates a first-half profit before tax (PBT) of £165m, earnings per share of 27.4p and a dividend per share of 7.8p. Full-year PBT forecasts are £390, slightly below the consensus estimate of £400m."At the time of its unscheduled trading update (11 Sept), management guided FY PBT to be towards the bottom end of the range which was £407m so we may now be too low; especially as management now expects H1 retail/wholesales margins to be at least flat year-on-year."With risk to forecasts now on the upside, the broker has maintained its positive stance and raised its target price from 1,250p to 1,500p.BC