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Housing hopes for Kingfisher overblown reckons Morgan Stanley

Morgan Stanley has thrown cold water on the barbecue and housing recovery – inspired success enjoyed recently by B&Q owner Kingfisher (LON:KGF).

The US broker has downgraded its view on the Anglo-French DIY chain to ‘underweight’, which it claims makes it only the second out of 23 brokers that cover Kingfisher to have a negative view.
The broker says Kingfisher is now seen as a play on the UK housing market with about 45% of its shares now owned by US holders.
These US buyers have been attracted by Kingfisher’s low share rating compared to US giants Home Depot and Lowe’s and the recovery in UK housing.

But Morgan says B&Q stands to gain far less from a housing market recovery in the UK than Home Depot does in the US with little correlation over here between transaction and spending on home improvement.

“B&Q’s struggle to generate LFL growth is more structural than cyclical. We remain convinced B&Q’s struggles can’t simply be explained by a weak housing market.
“Kingfisher shares have re-rated to all time highs, and risks of disappointment from here look much greater than prospects for positive earnings surprises or a further re-rating.”

Morgan Stanley‘s price target is 300p, implying the shares are almost 25% overvalued at the current market price. Shares today were down 4p at 402p.

Source: Proactive Investors

06 September 2013
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