Berenberg argues that synergies from J Sainsbury’s (LON:SBRY) tie-up with Walmart’s Asda could be as high as £1.5 billion, WebFG News reports. The comments came as the analysts lifted their valuation on the London-listed supermarket.
Sainsbury’s share price rose in the previous session, adding 1.39 percent to close at 299.50p, marginally outperforming the broader UK market, with the benchmark FTSE 100 index gaining 96.77 points to end the session 1.28 percent higher at 7,662.52. The group’s shares have added about 11 percent to their value over the past year, as compared with a 44.36-percent gain in the Footsie.
Berenberg lifts valuation on Sainsbury’s
Berenberg, which is bullish on Sainsbury’s with a ‘buy’ rating, hiked its price target on the shares from 300p to 369p yesterday, in the wake of the supermarket’s merger deal with rival Asda announced last week. WebFG News reports that while the grocer’s management is guiding for £500 million of net synergies after disposals and reinvestments from the merger deal with Asda, the broker reckons this number is ‘very conservative’.
“The net synergies number does not include any return on synergy reinvestments, which could drive a virtuous cycle of growth,” the analysts pointed out, adding that they also saw “significant e-commerce opportunities in both food and non-food, as the group benefits from Walmart’s technology and innovation with limited requirement for capex”.
Other analysts on blue-chip supermarket
Citigroup, which sees Sainsbury’s as a ‘buy,’ boosted its price target on the shares from 305 to 380p last week, while JPMorgan Chase, which is ‘underweight’ on the grocer, lifted its valuation on the stock from 200p to 260p. According to MarketBeat, the FTSE 100 supermarket currently has a consensus ‘hold’ rating and an average price target of 277.36p.