Broker snap: Dunelm a 'buy' after fourth-quarter beat, says Panmure

4th Jul 2013 10:44

Panmure Gordon has kept its 'buy' rating and 1,013p target price for UK homewares retailer Dunelm after the company's fourth-quarter trading statement came in much better than expected."We think that Dunelm's valuation premium to the (very diversified) UK General Retail sector average can be extended as growth continues apace. In addition, we see further upside risk to our forecasts," the broker said on Thursday morning.Fourth-quarter sales were were 6.4% higher than last year, well ahead of Panmure's 3.6% forecast. Meanwhile, despite "very tough comp" last year, like-for-like sales slipped by just 2.8%, compared with the consensus range of -10.6% to -1.2%.Panmure also highlighted that four new leases have been signed since the last trading update "which is very good going", taking the pipeline to eight. As for the current year, the broker said that a potential two-week heatwave isn't great news for the company, though the quarter on is the least important period for the business anyway.The broker thinks that Dunelm has the ability to return another £80-90m to shareholders in the year ending June 2016 following returns of £43.2m in 2010 and £65.8m in 2013."Having said this, we understand that year-end cash will be £5.0m better than we had forecast at £45m, so that a cash return could well happen sooner than FY2016E."The stock was down 1.05% at 938.5p by 10:35, having risen by nearly 35% so far in 2013.