Credit Suisse downgrades David Jones
March 17, 2010
Following yesterday’s first half result for David Jones, Credit Suisse (NEUTRAL, price target $5.50) downgraded the stock to neutral. The broker said the David Jones was trading at fair value with few near term catalysts to drive a re-rating.
David Jones maintained guidance for 5% to 10% NPAT growth in 2H10 and FY10 and 5% to 10% NPAT growth in FY11. Credit Suisse noted that David Jones had de-risked its gross margin several years ago, and 1H10 margins surprised slightly on the upside.
The broker’s neutral view on the stock is based on a view that the stock is fairly valued. The broker said the DJS is trading at 14x FY11 EPS and lacks near-term catalysts for outperformance. Credit Suisse said this inertia reflects the fact that DJS did not change guidance, caution around 4Q trading and capital management being off the agenda until 2012.
UBS (NEUTRAL, price target $5.15) says a positive earnings surprise is unlikely because the company is cycling off the stimulus boost in last year’s fourth quarter and an earnings drad from the ramp up at the Bourke St store. Citi (HOLD, price target $4.85) added that retail sales conditions would be volatile over the next half year.
Goldman Sachs (BUY, price target $6.24), however, was more bullish on the retailer. The broker said that uncertainty surrounding the cycling of one-off fiscal stimulus has seen the market excessively de-rate discretionary retailers. At a DJS specific level, Goldman Sachs says it is attracted to the stock due to leverage on new store, solid cost control and margin management.
David Jones maintained guidance for 5% to 10% NPAT growth in 2H10 and FY10 and 5% to 10% NPAT growth in FY11. Credit Suisse noted that David Jones had de-risked its gross margin several years ago, and 1H10 margins surprised slightly on the upside.
The broker’s neutral view on the stock is based on a view that the stock is fairly valued. The broker said the DJS is trading at 14x FY11 EPS and lacks near-term catalysts for outperformance. Credit Suisse said this inertia reflects the fact that DJS did not change guidance, caution around 4Q trading and capital management being off the agenda until 2012.
UBS (NEUTRAL, price target $5.15) says a positive earnings surprise is unlikely because the company is cycling off the stimulus boost in last year’s fourth quarter and an earnings drad from the ramp up at the Bourke St store. Citi (HOLD, price target $4.85) added that retail sales conditions would be volatile over the next half year.
Goldman Sachs (BUY, price target $6.24), however, was more bullish on the retailer. The broker said that uncertainty surrounding the cycling of one-off fiscal stimulus has seen the market excessively de-rate discretionary retailers. At a DJS specific level, Goldman Sachs says it is attracted to the stock due to leverage on new store, solid cost control and margin management.
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