Cannacord Genuity reiterates 'buy' rating on Travis Perkins

Analysts at Canaccord Genuity reiterated their 'buy' rating on builders' merchant Travis Perkins on Friday after having finally disposed of its plumbing and heating business.

Canaccord stated Travis Perkins' move to dispose of the unit would likely come as a relief to the market and follows its demerger from Wickes in April and marked the completion its business portfolio simplification.

"After delays and challenges caused by Brexit uncertainty and the pandemic, the group has in short order achieved two big strategic steps this year," said Canaccord.

"Given the profitability and recent track record of the business, the price achieved looks reasonable and broadly in line with expectations, with the key point being that this disposal allows the group to move on and focus on its trade businesses."

The Canadian bank, which reiterated its 1,725.0p target price on the stock, also stated that the strength of TP's balance sheet and its lack of appetite and desire for any big M&A moves meant that returning the sales proceeds to shareholders was "a sensible move" and highlighted that notwithstanding the "positive impact" of the expected share buyback, the disposal was expected to be earnings dilutive for 2022.

"However, given the strong trading currently being enjoyed, we would not be surprised to see consensus underlying earnings move up over the coming months, assuming trading holds up into H2 2021. The disposal should be well received by the market, and we continue to see an attractive outlook for the newly simplified, trade-focussed group," concluded the analysts.