Leading City analyst Geof Collyer has issued Sell recommendations for both Punch and Spirit, the pub companies that demerged at the start of August, ahead of their final results on 20 October. Collyer, of Deutsche Bank, set a target price of 9p for Punch and 40p for Spirit. He expected average pubs trading to be -11% at Punch, the tenanted and leased operator, with the estate almost 40% smaller than in FY2005, before the managed Spirit estate was added (5,080 pubs vs 8,227). Ebitda in Punch will be 45% below its peak, with 10% of the most profitable pubs moving to Spirit but the bulk of the overheads still with Punch. Collyer said: “The combined FY’10 average ebitda per pub pre-demerger, was £51,965. The average ebitda of the pubs transferred to Spirit is forecast at £77,127, leaving our estimate for new Punch at £50,696 per pub. Adjusting the estate for the demerger, this average profit figure should be +1% on FY’10 proforma.” He added: “The new chairman started in mid-September. The market will be looking for clear signs that talks with bond holders is a ‘coming soon’ event. “We will be keen to see the following: (i) how much debt has been repurchased and at what price during the past year; (ii) how much cash is left in the business and how much can be upstreamed post year end; and (iii) whether the group still feels comfortable with its disposal programme.” For Spirit, Collyer predicts totoal sales to be +1.8% from 2.4% fewer pubs, with like-for-likes for the year at +5.2%, with “encouraging progress” of its rebranding programme. However, despite the progress, Collyer said: “Spirit’s performance over the last four difficult years remains firmly rooted at the bottom of the sector tree.” “Aggregate lfls performance since 2007 is -1.6%), compared to +11.8% at Greene King (433p), +8.1% for M&B (240p) and +2.4% for JD Wetherspoon (395p).” He predicted ebitda to be “broadly flat” at +0.4%, adding: “There were another 14 lease reversions during the year, which will impact margins. We estimate a drop of -9 bps.” However, the increase in the onerous lease provision, credit by 22% to £18m, means Spirit is likely to report ebita growth of +6% with margins rising by +39 bps, Collyer added. “The impact of this provision remains deeply distorting, accounting for c.30% of the reported managed pub ebita, and, more importantly, inflating the PBT by around 75% at the reported level.”