A leading analyst has said that the market should take the retirement of Enterprise Inns chief executive Ted Tuppen as a sign that the period of difficult trading over the past six years is coming to an end.
Geof Collyer at Deutsche Bank, who rated Enterprise as a Buy, said: “We have always thought that if the CEO was to retire, it would be once the business had been nursed back to good health, and therefore we see the timing of this move as a broad confirmation of this view. It is traditional for share prices to come off a little when this kind of thing happens, but the market should take it as a sign that the period of difficult trading over the past six years is coming to an end. We expect the shares to at least recover most of their recent lost ground.”
Collyer said that the group’s headline results were almost exactly in line with his estimates.
He said: “The current trading statement – which talks about sustainable net income growth – shows that the lfl net income growth has continued into Q1’14, and investors should bear in mind that ETI has some soft comps ahead of it this year. We are forecasting lfl net income growth in FY’14 and a return to Absolute EBITDA growth in H2’15. With positive news on current trading, soft comps and an improving outlook, the shares should rally. Our 205p price target reflects a 30% discount to NAV vs. current 53%.”
The analyst said that improving fundamentals should help narrow NAV discount from current 53%.
He said: “Business failures fell again, by 21%. This was 3% better than DBE and represented just 3.9% of the H2 opening estate. It was also 40% lower than the H1’09 peak. This is the clearest sign for us of the business turnaround. Disposals were in line at £150m, with 400 bottom end pubs sold at an av/pub of £290k compared to 301 bottom end sites last year at av/pub of £222k.”
