DAVY VIEW

The steep fall in the Grafton share price suggests that a deep decline in earnings is being discounted. There is no doubt the outlook for the next year or so could be quite challenging, as is reflected in our forecast adjustments. However, while acknowledging this, other enduring aspects of the Grafton business should not be ignored. Particularly relevant in this regard are the group’s net cash (ex-leases) level (now around 30% of the market capitalisation) and the discrete value of its portfolio. We believe its range of highly attractive businesses are worth far above the market value currently ascribed to the group. When sentiment turns, there is plenty of upside to play for in Grafton.