Investment firm UBS has raised its price targets for UK supermarket chains Morrisons and Tesco.
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The retailers were raised by the analyst because it believed investors were starting to value the food retail sector using the PropCo/OpCo methodology – splitting the businesses into property company and the underlying operating business.
Morrisons’ price target was raised to 360 pence from 340, while the UK’s largest retailer, Tesco, was raised to 550 pence from 470.
UBS said in a research note: “We believe that the market is starting to value the food retail sector using PropCo/OpCo methodology, prompted by recent private equity interest and increasing property prices in the UK. Tesco and Morrison have significant freehold property assets equating to 57% and 75% of EV respectively.
Tesco has an estimated GBP22.7bn (US$44.7bn) of freehold assets, while Morrison’s property could be worth GBP7.0bn, UBS said.
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