Citi has upgraded earnings forecasts in the wake of Beacon Lighting’s second half trading update provided with its result. The broker sees increasing interest rates as a risk to the housing cycle and discretionary spending, both of which have been favourable for Beacon’s sales.
However analysis suggests an increase in the cash rate appears to have a lagged impact on house prices and renovation growth. Beacon’s upgraded long term rollout target of 184 stores implies 36% of its rollout potential still remains.
Citi retains Buy, given the long-duration growth prospects from rollout, trade and international, and a lag in earnings impact from rising rates. A roll-forward of valuation leads to a target cut to $3.00 from $3.55.
Sector: Retailing.
Target price is $3.00.Current Price is $2.51. Difference: $0.49 – (brackets indicate current price is over target). If BLX meets the Citi target it will return approximately 16% (excluding dividends, fees and charges – negative figures indicate an expected loss).
