Simon French at Panmure Gordon looks ahead to the Q3 interim management statement from Enterprise Inns, the tenanted and leased pub operator, on 9 August.
French reiterate his Buy recommendation for Enterprise and a 87p Target Price, implying c55% potential upside, although he cut his forecast for 2012.
He said: “H2 was reported to have started well, and the group reported that the costs of discretionary financial support have continued to reduce alongside a further reduction in business failures, bad debts and overdue balances. The group recently announced the agreement of a new £220m forward start bank facility out to June 2016 which will commence when the existing bank facility expires on 16 December 2013. Tranche B of the bank debt (which expires in December 2012) now only has £45m outstanding.
“To reflect the recent wet weather and more significantly recent disposals as reported in the trade press we have reduced our FY 2012E forecast by c4% to £135m PBT (20.1p EPS) slightly below consensus expectations of £139m PBT (20.7p EPS). Our FY 2013-14E EPS forecasts consequently fall by c7% and c8% respectively.
“We don’t forecast any dividend payments but note there will be no restrictions on the group’s ability to pay dividends once Tranche B of the existing banking facility is fully repaid raising the likelihood of a return to the dividend list in the short-term.
“On our forecasts the stock trades on a CY 2012E adj EV/EBITDAR of 8.8x. In spite of the share price doubling so far this year we believe the stock still offers material further gains.”
