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Kingfisher share price soars on upgrade from Nomura

City broker Nomura has upgraded its rating for UK home retail group Kingfisher (LON:KGF) to a "buy".

Analyst Christopher Walken said that despite the current macroeconomic uncertainty, the company's sourcing strategy will drive earnings growth and he targets 320 pence per share.

The current price for shares in the company, which employs 80,000 people and has well-known brands such as B&Q and Screwfix, stands at 235 pence.

"We believe that sourcing initiatives, common ranges and strong execution will continue to drive earnings growth despite short-term macro concerns," said analyst Walken in a note today.

He said it was the broker's view that Kingfisher could achieve double-digit earnings growth to full year 2014/15, which offered a strong opportunity for investors, relative to its peers.

The key factors of Kingfisher's strategy include furthering its direct and common sourcing offering a combined sum of more than £400 million of potential savings, and taking advantage of a lack of manufacturer brand awareness to gain greater control of the value chain, said Walken.

Its strategy also includes investing £15 million in innovative and exclusive products to push top-line growth and expand new and existing markets, said the note.

"Recent market data is not supportive for DIY retailing. The UK, France and Poland are showing signs of slowing," said Nomura.

The analyst said that in anticipation, it was lowering its forecasts for the second half of 2011/12 and full year 2012/13 but that despite these cuts, margin and cost initiatives continue to drive double-digit earnings growth.

Source: Giles Gwinnett - Proactive Investors

07 September 2011
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