Newspaper article The Evening Standard (London, England)

Sainsbury's Gains as ABN Makes a Buy Call

Newspaper article The Evening Standard (London, England)

Sainsbury's Gains as ABN Makes a Buy Call

Article excerpt

Byline: MICKEY CLARK

JUST a day after a single institutional shareholder appeared to dump 33million shares in J Sainsbury, City big-hitter ABN Amro has decided to raiseits rating on the UK's third-biggest supermarkets chain from hold to buy.

It has also set a new target of 440p, having seen the shares fall 13% sincefull-year results earlier this month.

The broker reckons this is inconsistent with the company's fundamentals.

It has downgraded its earnings forecasts but emphasised this has nothing towith Sainsbury's business model. It believes the company will increase sales by[pounds sterling]3 billion over the next three years, and estimates operating profit growth of35%.

ABN reckons earnings downgrades and a price- earnings ratio premium to thesector are not a particularly good combination for positive recommendations,but points out that the shares trade on an estimated profit discount, and theoutlook for growth remains healthy.

Sainsbury's shares responded to the move with a rise of 5 1/4 p to 350p,putting them among the better-performing blue-chips.

Shares generally continued to drift in thin trading despite a softening of oilprices from their recent record highs.

The FTSE 100 index fell 23.6 points to 6158.0.

Other retailers moving better were Carphone Warehouse , up 2 1/2 p at 238p, andWm Morrison , 2 1/4 p dearer at 281 1/4p.

Solomon Gold , down 1/2 p at 18 1/4 p, has found positive results from itsValehailala Creek prospect in the Solomon Islands, and plans test drillingswithin the next three months.

The mining company's assay results are being severely delayed by very highdemand on laboratory facilities in Australia but, with improvements to thefacilities under construction, it expects to improve assay turnaround.

Caza Oil & Gas, unmoved on 33p, is raising [pounds sterling]11. …

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