Nomura cuts AB Foods price target; says valuation is stretched

9th Jul 2015 14:27

Nomura cut its price target for Associated British Foods to 2,815p from 2,850p.It said the company's latest trading update, released earlier on Thursday, was broadly in line with expectations, with visibility improving and greater margin certainty supporting the shares.However, Nomura said the valuation is stretched, with the shares already reflecting a sizeable premium for future growth."Our sum-of-the-parts based target price derives a 24% premium for Primark to the average EV/EBITDA multiple on full-year estimates of Hennes & Mauritz and Inditex," the broker's analysts added.The Japanese bank continues to expect a 70 basis points decline in full-year 2015 earnings before interest and tax margin and a 150 basis points decline in full-year 2016, but said a good proportion of the impact has been successfully mitigated by the group's buying teams bringing greater certainty to its estimates.It rates the stock at 'neutral'.At 14:32, AB Foods shares were up 5.8% at 3,100p.