Goldman upgrades Premier Foods after recent weakness

11th Jun 2014 09:50

Goldman Sachs has upgraded its rating for UK food producer Premier Foods from 'neutral' to 'buy', saying it sees upside after the stock's recent falls, which have seen it lose 60% of its value over the past three months."Following a significant de-rating since March, valuation is undemanding on an unlevered basis and attractive on an equity basis, in our view," the US bank said.Goldman expects only "muted" earnings growth for the Ambrosia, Bisto and Mr Kipling owner over the next few years amidst a competitive UK supermarket pricing environment.However, a steady deleveraging of the balance sheet should drive a gradual re-rating in the share price."Following the capital restructuring earlier this year, we believe Premier Foods has sufficient debt facilities to fund the business through to the end of the decade, and do not expect any further equity raising. "The new schedule of cash contributions towards the pension deficit is fixed through to 2019, providing additional visibility."The target price for the shares has been raised from 75p to 90p.Premier Foods was trading 6.6% higher at 61.58p by 10:16 on Wednesday.BC