Broker tips: Kingfisher, Fuller, Smith & Turner, Aviva

Deutsche Bank upgraded B&Q owner Kingfisher on Monday to 'buy' from 'hold', highlighting, among other things, a cheap valuation.

The bank noted that home improvement grew during Covid and while this trend is moderating, there are some attractive longer-term drivers of category spend and Kingfisher is well placed to take advantage of this.

DB, which cut its price target on the stock 335.0p from 355.0p, said the trade element is expected to see stronger growth than DIY over the next few years, and this accounts for around 50% of the business.

"With cash on the balance sheet supporting share buybacks why is the stock trading at circa 8.5 x FY23 e PE? The issue in our view is investor uncertainty over consumer spending and fear of a slowdown in housing transactions and big ticket spend," it said.

Deutsche said pre-tax profit was set to decline in 2023 but as we head through the year it expects investors to look forward to the earnings growth in FY24.

Analyst at Berenberg lowered their target price on pub landlord Fuller, Smith & Turner from 1,000.0p to 850.0p on Monday but acknowledged that London's recovery was building steam.

Berenberg said it believes that the risk/reward trade-off for Fuller, Smith & Turner shares was "attractive", stating that while the company's trading performance had lagged that of its listed peers, it believes that can be put down to its "significant exposure" to central London.

With data increasingly pointing towards an uptick in the capital's recovery, Berenberg expects that the next update from the company will be "far more positive" on recent trading.

The German bank, which reiterated its 'buy' rating on the stock, also thinks that the business is less exposed to a consumer squeeze than most, given its more affluent customer base, and thinks that, at its current valuation, Fuller's asset backing should provide "plenty of support".

In a note on UK life insurance, Barclays downgraded Aviva from 'overweight' on Monday but upped its price target for the stock from 468.0p to 480.0p.

"We expect bulk annuity volumes to remain robust at £30-50bn per year for the next 3-5 years," it said.

"Conversely, we anticipate pedestrian volumes in retail annuities as consumers face an inflation-driven cost of living crisis. We favour insurers with exposure to bulk annuities," said Barclays.