Morgan Stanley downgrades Kingfisher, upgrades Poundland

19th Jun 2015 09:16

Morgan Stanley downgraded Kingfisher to 'underweight' from 'equalweight', but raised the price target to 310p from 300p.The bank noted that since it upgraded the stock in December, Kingfisher has exited China at a price below asset value, seen its proposed acquisition of Mr Bricolage fall through and experienced significant adverse currency movements.It said the company's recent strategy update implied that the Screwfix trial in Germany is meeting with only limited success and that the new management team has been unable to find a solution to B&Q's fundamental challenge, "that the UK home improvement market is moving from Do It Yourself to Do It For Me."Despite all the above, the shares are up 14% over the last six months."Now trading on 16x price-to-earnings, we think Kingfisher is being priced almost as a recovery story, but we think a meaningful recovery is unlikely," said MS.The bank said the company's new strategy to create a unified business by selling the same products across Europe presented in the same way is high risk. "Whilst we accept that this strategy could deliver very material cost savings, we think that it may negatively impact sales, potentially very significantly."Also on Friday, Morgan Stanley upgraded Poundland to 'equalweight' from 'underweight' to reflect recent share price weakness.At 11:07, Kingfisher shares were down 0.1% at 362.50p, while Poundland was up 4.7% at 314.08p, rebounding from falls on Thursday after it warned over its outlook.