Analysts at UBS have lifted their price target on do-it-yourself retailer Kingfisher on expectations that the purchase of Mr.Bricolage offers greater scope to contribute to earnings than initially thought.
The broker initially thought the transaction might be about 2% earnings accretive at the earnings per share level. Now it believes the deal may deliver even greater returns from converting the owned stores - which lost €13m last year - to the Brico format.
Thus, converting 30 Bricos from the Mr Bricolage-owned estate, and assuming the average profitability of €1.3m per store is maintained, would result in approximately €40m in incremental profit.
"The losses from the remaining owned stores could be removed either by terms improvement or from switching some to franchise." In turn, franchise profits could be funded by the greater returns to scale which resulting from the transaction. In the long-term that would amount to about a 7.5% increase in profits, or between €75-80m."
"France could then be making over £500m profit per annum with little additional capital requirement, supporting the multi-year cash return plans," UBS adds.
As a result of all of the above the Swiss broker raised its price target on the stock to 475p from 440p previously, while at the same time upgrading it to 'buy' from 'neutral'.
An enthusiastic note from Panmure Gordon on Aveva pointed out that it is the first time since October 2012 when the software company's share price has been below 'a score' (£20) and hence the first time since October 2011 when the broker will put a 'buy' recommendation on the shares.
"OMG you can get Aveva shares
for under £20 - when did that happen last?" asked an incredulous analyst George O'Connor.
To be sure, he admitted, there were "a few wrinkles" in the third quarter trading update and the shares "are not the cheapest", trading on a price earnings ratio of 23.6 times, but he upgraded from 'hold' due to a strengthening operational backdrop and the potential upside from E3D plant design product.
Broker Bernstein has downgraded UK telecoms group BT, saying it may over-spend on TV sports rights and face more competition from rival Virgin Media.
Bernstein, which reduced BT to 'market-perform' with a fair value of 385p, said "much good can be said" about BT and its investment case, although a good deal of that was well-understood and priced into its shares.
The broker said there were four potentially big risks on the horizon that could limit a rise in the stock.
BT, which has launched two sport channels to compete with arch-rival BSkyB, could overspend on programming, particularly at the next auction of rights to show Premier League soccer.
Bernstein also said BT could face a renewed competitive challenge from rivals, particularly Virgin which has embarked on a cost-cutting drive, if the "triple-play" broadband, fixed line and TV market fails to expand as much as expected.
Other risks included a less favourable regulatory regime for fibre networks and a bigger-than-expected increase in the company's pension deficit.
Bernstein said: "None of these risks are necessarily imminent, but all are potentially significant, so we find it hard to find a compelling higher valuation."