Wolseley and Travis boosted by broker comment

Published:  15 September, 2010

LONDON: Wolseley lead the FTSE100 leader board for most of yesterday rising 69p to 1450 while Travis Perkins was up 15p to 829.50p after Morgan Stanley said both stocks have growth potential and remain attractively valued despite weak economic data.

Jessica Alsford at Morgan Stanley said: "We think both stocks have company-specific growth drivers and remain attractively valued - but we cut our forecasts and price targets following recent negative macro newsflow. Even in a low growth environment we would expect profitability to improve at Wolseley next year. A new focus on pricing and improving underperforming businesses should produce easy wins, despite the muted economic recovery. As such we forecast plus 40% 2010-13 earnings per share compound annual growth rate.

"For Travis, the BSS deal - Travis agreed to pay around £560m for the plumbing and heating group in July - remains an attractive investment point. On our base case assumption of £25m synergies in 2013, the deal is mid single-digit earnings accretive next year. However, we seen potential for earlier and greater cost savings driven by better purchasing power and removal of duplicate overhead costs."

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