A City analyst, who has been bearish on the prospects for quoted tenanted operators, has re-iterated a cautious view on Punch Taverns after yesterday’s results, ,writes Paul Charity. Jamie Rollo, of Morgan Stanley, has claimed that Punch “still has a mountain to climb despite everything it has done to stabilize and improve the business”. He said: “So far Punch has raised £350m of new equity, sold 1,300 pubs (15% of the estate) for £600m, reduced net debt by £1.2bn (-27%), reduced central costs from £100m to £60m, introduced annual lessee support of £24m, cut capex from £200m to £90m, and changed senior management. “Impressive stuff, yet the first half of the financial year trends were as poor as ever: leased pub like-for-likes EBITDA fell another 11% (and set to remain so in the second half, with further declines in the 2011 financial year and managed pub like-for-likes sales fell 3%, well below its peer group. “While disposals are going well, debt buybacks are no longer at a big discount, so selling the remaining 1,200 non-core pubs for circa £300m will not be that material to either Net Asset Value or Earnings Per Share, even if sold for 15x EBITDA. “Meanwhile, headroom to its covenants is shrinking as debt service levels rise and EBITDA declines. PLC cash of £315m can maybe reduce net debt another 10%, yet EBITDA may decline more than this. “We reduce our forecasts to reflect a weaker than expected operating performance and higher tax rate, partly offset by lower depreciation. We remain cautious on the shares."