Shares in J Sainsbury (LON:SBRY) have been little changed in today’s session, as analysts at UBS hiked their valuation on the blue-chip grocer ahead of the group’s quarterly update tomorrow. The move came after Barclays lifted both its rating and price target on the blue-chip grocer last week, assuming an 80-percent chance of success of the group’s proposed merger with Walmart’s Asda.
As of 14:15 BST, Sainsbury’s share price had added 0.06 percent to 317.40p as of 14:20 BST, underperforming the broader UK market, with the benchmark FTSE 100 index having gained 0.92 percent to 7,617.01 points so far in today’s session. The group’s shares have added more than 28 percent to their value over the past year, as compared with about a three-percent rise in the Footsie.
UBS lifts valuation on Sainsbury’s
UBS, which has a ‘buy’ rating on Sainsbury’s, lifted its valuation on the blue-chip supermarket from 325p to 400p today. Proactive Investors quoted the analysts as saying in a note to clients that incorporating Walmart’s Asda into their model and pro-forma financials suggested material upside.
“With gross cost synergies of c.£1.3 billion, Sainsbury’s has £700 million-£800 million firepower to invest in the customer – enough to cut prices by c.250bps (basis points),” the broker pointed out, adding that if the Asda deal ‘broke,’ their standalone fair value of 265p per share suggested a positive skew on the range of outcomes.
Supermarket to post results
The blue-chip grocer is scheduled to post first-quarter results tomorrow, with the update to come after the latest Kantar data showed that Sainsbury’s had underperformed the other ‘Big Four’ supermarkets, with its sales having fallen in the 12 weeks to June 17.
“Clothing and general merchandise both lost momentum in 2017-18 but grocery had shown some signs of improvement, in terms of total sales growth,” The Telegraph quoted Russ Mould at AJ Bell as commenting ahead of Sainsbury’s results.