Broker snap: Shore Capital sees activist investors circling Morrisons

13th Jan 2014 10:13

Broker Shore Capital said it expects activist investors to continue to show interest in supermarket group Morrisons as reports suggested it was planning to sell part of its shop portfolio.Shore highlighted claims that US funds such as Elliott Associates had built a stake in Morrisons with a possible eye to forcing it to raise cash by selling stores.Other weekend reports said Morrisons was working on a plan to raised hundreds of millions of pounds by selling some of its shops, 90% of which it owns, giving it a property portfolio worth about £9bn.Shore said it could see scope for a "modest realisation" of cash from non-trading freehold assets and selective stores to cut net debt and highlight the implicit value of the business.But the broker, which is advising investors to hold the stock at 237p, voiced concerns about potential wholesale sales and leasebacks of shops, saying it could threaten the viability of the group."Whilst there can be short-term gains for shareholders from a comprehensive property sale programme through distributions, we question whether such activity is in the interest of the company in the long-run," the broker said. "Will the shareholders that may seek short-term radical action be there for the duration?"Morrisons has ramped up the roll-out of convenience stores and has just started online grocery deliveries thanks to a tie-up with rival Ocado.But on Thursday, it said total sales excluding petrol in the six weeks to January 5th were down 1.9% while like for like sales, excluding new stores, fell 5.6%.Shares in Morrisons were near the top of the FTSE 100 risers in mid-morning trade in London, rising 7.2p to 243.3p.PW