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May 31 2018, 06:30 IST/BST
The Grafton investment thesis is increasingly centred on capital allocation. Its recent track record in this regard is strong. It has deployed investment funds strategically and effectively of late, the full benefits of which are only now becoming apparent. Through the 2018-2020F period, we expect Grafton’s available capital to jump to £400-450m, providing attractive optionality for management. We are confident it can continue to generate attractive returns on investment (both organically and externally), thereby boosting profits and sustaining its current outperformance versus the broader UK merchanting sector. We reiterate our ‘Outperform’ rating with a price target of 900p.