Primark growth potential boosts AB Foods

AB Foods was in demand on Thursday after Morgan Stanley set out a 25-year plan for its Primark chain.

Primark has the potential to grow nearly tenfold by 2040, creating a global network of 2,700 stores from 287 currently, Morgan Stanley forecast. That would make Primark about as big as H&M by store count and equal to Inditex by floor space, it said.

"Our growth potential analysis suggests that Primark is still in its infancy," the broker told clients. "Historically the best investment strategy in retail has been to own retailers with more than 20 years of double-digit space growth ahead of them, irrespective of valuation, which makes Primark via AB Foods a core holding in our sector."

Morgan Stanley set a £35 target on AB Foods, which rose 2.4 per cent to £28.57. That was in spite of the broker trimming earnings forecasts to reflect the dollar's strength.

The FTSE 100 rose 0.2 per cent, up 14.35 points to 6,960.63. For April the index was up 2.8 per cent, its third positive month of 2015 so far.

Royal Mail jumped 5.3 per cent to 467.7p after Lloyds Bank's private equity arm pulled out of plans to expand Whistl, its UK joint venture with PostNL. Royal Mail had said previously that Whistl's plans to challenge its monopoly would cost £200m in revenue by 2018.

Anglo American led declines among the miners, down 2.9 per cent to £11.05, having outperformed this week amid talk of progress with its disposals.

Canaccord Genuity cut Anglo off its "buy" list as part of a sector downgrade. South Africa, which will provide half Anglo's operating profit this year, has a unique set of problems and the group's Minas Rio iron ore project in Brazil looks uneconomic at current prices, the broker said. "We are still waiting for progress on the company's divestment programme, and the positive impact of the cost-cutting and business improvement programmes that are being undertaken is more than negated by the decline in commodity price estimates."

Canaccord also advised taking profit on Glencore, down 1.1 per cent to 310.3p, and Vedanta Resources, which lost 0.6 per cent to 628.5p.

Wm Morrison fell 2 per cent at 186.8p ahead of results on Thursday, which will be the first under chief executive David Potts. There are no clear fixes to arrest Morrison's falling sales yet the group is so far not an obvious bid or break-up target, said UBS, which started coverage with a "sell" rating.

Ophir Energy dropped 12.3 per cent to 142p after Jan Kulczyk, a founding investor who was the explorer's second-biggest shareholder, sold his entire 8 per cent stake at 140p per share. The 56m shares were equivalent to four weeks of average volume.

RPS lost 9.8 per cent to 213p after flagging up further weakness at its energy division. A stabilisation of explorers' budgets in February did not hold into March, the consultancy said.

3i was up 1.1 per cent to 506.5p after Action, its largest investment, reported strong full-year results. Merrill Lynch estimated that the Benelux-based discount retailer would be worth £800m for 3i within a few years.

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