Geof Collyer, of Deutsche Bank, has predicted Enterprise Inns will emerge from the aftermath of the Pubs Code as a “much more vigorous property manager” with more control over its business and achieving a greater proportion of income from fixed rent.
Issuing a Buy notice for the company, Collyer said the bank’s analysis suggested Enterprise would be able to offset any negative profit pressures, and that its evolving strategic responses will lead to eventual profit upgrades.
He said: “We think that the potential changes should convert ETI into a more proactive, commercially minded property manager that could also encompass a partially owned REIT and a managed pub division alongside the traditional tenanted estate. We have tweaked up our price target by +5% to 215p, and remain confident that the share price should double from here. “
He added: “Our overriding conclusion is that ETI will emerge as a much more vigorous property manager, with more control over its business, and achieving a greater proportion of its tenanted & leased income from fixed rent. All of this should combine to narrow the current 65% NAV discount that the shares are trading on: a 10%ppt reduction would be worth +30p per share. Our analysis suggests that a ‘Sum-of-the-Pubs‛ valuation for ETI as a tenanted & leased pub business, incorporating a managed pub division and a partially demerged REIT could be worth +116% more than the current share price.”
