Broker snap: Tesco fairly priced, Merchant Securities keeps hold

18th Apr 2012 09:47

Tesco's preliminary results are a 'non-event' after coming in line with expectations, according to Merchant Securities, which says that the key focus point is the strategy going forward."The statement fails to provide anything new on their strategy. UK remains the key focus with £1bn investment to achieve their 'UK Plan' focussing on six key elements. The key questions is, how long will the recover take?" said analyst Amish Chohan.The broker highlights that Tesco will maintain its UK operation with the 'Fresh and Easy' brand, which is expected to break-even in 2013/14. Meanwhile, it says that the firm is comfortable with current financial year estimates of earnings of 34.4p - flat earnings growth.Merchant Securities says that the stock is trading on at 9.5 times 2013 earnings, which is a justified discount sector peers Sainsbury and Morrison, which trade at 10.6x and 10.2x, respectively. As such, the broker thinks Tesco is "fairly priced" and maintained its hold rating.Tesco's shares were trading 1.81% higher at 334.25p by 09:47 on Wednesday morning.BC