Best of the Brokers for 21 October 2015

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POUNDLAND
Investec has initiated coverage of Poundland with a “hold” rating and a target price of 300p. The broker said near-term profit benefits from the integration of 99p Stores are expected to return Poundland to 20 per cent growth or more in 2017 and 2018 after tough trading this year. However, Living Wage costs and limited like-for-like growth could result in no profit growth from the underlying business over that period, it warned.

OCADO
Macquarie has begun coverage of Ocado with “outperform” and a target price of 410p. The analyst believes the market is significantly underestimating operating leverage in Ocado’s business model. Data show that the Ocado branded basket is slightly cheaper than Tesco and Sainsbury’s which it thinks is impressive given just 0.7 per cent market share. It also believes Amazon Fresh fears are slightly overdone.

DAIRY CREST
Shore Capital has reaffirmed its “buy” rating at 615p after the UK Competition & Markets Authority (CMA) finally gave clearance for the acquisition by Muller UK & Ireland of Dairy Crest’s dairies division. The analyst said Dairy Crest can move on without the CMA cloud at the forefront of its mind to focus on its core brands and the full commissioning of its brand new factory in Cornwall for making the key ingredients in baby food.