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Merrill Keeps Great Atlantic Rating

Merrill Lynch keeps Great Atlantic & Pacific (GAP) near-term buy.

Analyst Mark Husson says it seems A&P's problems are timing issues; i.e. recognizing cash received as income straight away rather than amortizing income as reduction in cost of goods sold over the life of a contract (usually 12 months.).

Husson says A&P will will cut its fiscal 2002 (Feb.) EBITDA, and raise its 2003 EBITDA; while the amount not known yet, Husson says he would be surprised if it were more than 20% of EBITDA. With the stock down sharply, he says the market seems to be discounting a worst-case scenario.

Husson thinks the stock remains cheap even if 20% of fiscal 2002 is EBITDA spread out into fiscal 2003. He rates the shares as long term strong buy.

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