Brokers' Views: FinnCap

In his latest food sector digest, FinnCap analyst Charles Pick serves up three choice morsels worth tucking into. AB Foods represents a ‘solid low risk situation’, after ‘excellent’ first quarter sales at the Silver Spoon sugar-maker and Primark clothes retailer. With the fully listed company having indicated earnings will increase significantly this year and are likely to better the existing 62.5p consensus, Pick rates the shares a buy.

Pick is similarly bullish about grocery products supplier Booker, which delivered 6.7 per cent third quarter sales growth. Conceding the shares are ‘not cheap on a p/e basis’, Pick regards Booker as ‘a first class management story’, with CEO Charles Wilson ‘set to deliver ongoing advances in revenue and margin’. With links to Tesco and a new deal with Denmark's leading food retailer, meat packer Hilton Foods represents ‘excellent value’, trading on a 2009 p/e of around 10 times and offering a 4.9 per cent yield.

Chocolatier declines

Despite reporting a 2.4 per cent sales decline for the ‘crucial second quarter’, confectionary retailer Thorntons remains a buy, though a reappraisal of its forecasts is pending. Pick notes that Thorntons’ chocolates ‘are low-ticket items’ and whilst the shares offer value, now doubts whether his £7.9 annual profit forecast ‘will be attainable’.

Investors are urged to ‘hold’ biscuits and frozen pizza maker Northern Foods and Hovis and Sharwood's brand owner Premier Foods. After Northern saw previous like-for-like sales gains slow in the third quarter Pick says ‘the main merit remains the above-average yield of 6.7 per cent on a maintained 4.5p payment’. Premier pays no dividend but is lowly rated and the presence of strategic shareholders on the register may spark takeover speculation ‘at some stage’.