Mitchells & Butlers may have slipped down to fifth or sixth place among major pub company’s, according to leading sector analyst Geof Collyer following M&B’s latest results this morning. M&B reported a 3% rise in like-for-like sales in the nine weeks to 15 September, with like-for-likes up 2.1% for the 51 weeks of the year to date. Geof Collyer at Deutsche Bank pointed out that M&B’s performance against its peer group continues to slip. “M&B hasn’t had any real kicker from the Olympics unlike Greene King (598p, Buy) or Spirit (54p, Hold) – both of which have a much greater southern bias to their retail estates. “With Marston’s trading update due next week, it is quite possible, in terms of latest reported trading, that M&B could have slipped down to fifth/sixth place amongst the major pub retailers. As we have repeatedly stated, it is difficult to compare the pub groups given that they nearly all have different year ends – you have to look at the longer term trend.” He made no changes to forecasts and issued a Hold recommendation. “Overall, M&B shares are nearly +20% over the past quarter, building in expectations for the new CEO (starting on 8 October), but it is clear that he has a lot to do to restore M&B to the top of the sector tree. “In terms of recent trading, lfls over the past 9 wks was +3.0% (vs. a relatively weak comp of +0.5%) has seen a modest acceleration from the 42 wk stage when they were +1.9%. Drinks sales were +3.5% last 9 wks vs. +0.9% at 42 wk stage which should help Q4 margins, given that drinks gross margins are around 700 bps higher than food, though we are looking for underlying EBITA margins for the year to drop by around 30 bps.” Simon French at Panmure Gordon reiterated a Sell recommendation at a target price of 225p. “This rate of growth is an acceleration on the 1.9% reported for the 42 weeks to 14 July, but lags behind the peer group such as JD Wetherspoon which reported 8.4% LFL sales growth over broadly the same period. The group reports that EBIT margins have progressed from the half-year but FY margins will be slightly behind last year as anticipated. “We expect no change to consensus expectations of £170m PBT (30.9p EPS). The market thinks M&B represents good value because the P/E is low at 9.2x but the adjusted EV/EBITDAR of 7.5x is a premium to managed pub and restaurant peers. Therefore we reiterate our Sell recommendation and 225p target price, implying 22% downside potential. “The market thinks M&B represents good value because the P/E is low at 9.2x but the adj EV/EBITDAR of 7.5x is a premium to managed pub and restaurant peers. Therefore we reiterate our Sell recommendation and 225p target price, implying 22% downside potential.” However, Douglas Jack at Panmure Gordon issued a Buy recommendation and held full-year forecasts. “In our view, the current valuation does not reflect the quality of M&B’s estate and the potential for margin growth/dividend resumption. The recruitment of independent non-executives should be the next step in re-rating the stock,” he said. “We are holding our forecasts but believe there should be slight upward pressure on consensus. In our view, the 8.0x EV/EBITDA rating (vs Greene King 9.7x) does not reflect the progress that is being made, nor the quality and potential of M&B’s estate. “There is plenty of innovation coming through at brand level, which the company will spend eight hours showing analysts on Tuesday’s site visit. There is a risk that full year LFL sales will soften slightly in weeks 52 and 53 against tough comparatives, but they should remain well above our 1.5% assumption.”