ShoreCap stays at 'buy' on Sainsbury, says report of potential bid interest 'flaky'

In a research note sent to clients, Clive Black described a weekend report of private equity interest in Sainsbury as "flaky".

For starters, he said, there was only one potential suitor, Apollo - if that.

And they were now in talks that might see them join Fortress's bid for Morrisons.

Nevertheless, Black conceded that the outcome of Fortress's bid could be key in Apollo's decision-making.

Regardless, for the analyst, there was a slew of positive drivers for the sector.

They included elevated sales, improved online returns, stable gross margins, better fuel profitability, the lowering of operating costs and capital discipline.

"Such an amalgam, noting better understood and maturing German discount chains in the UK too, makes for structurally improved free cash flow generation, manifested in rising FCF yields that to us sparkle to other buckets of capital than is the case for equity capital markets."