Pubs group Mitchells & Butlers is out of favour at the moment. It is due to report full-year figures next week, but there are dwindling hopes it will unveil a radical transformation.
It recently put on hold a planned property joint venture with entrepreneur Robert Tchenguiz, who owns 14% of the business. No prizes for guessing the reason for the delay - the credit crunch.
Now, Morgan Stanley has cut its rating from overweight to equal weight and its price target from 850p to 700p. It said: "We think the prospect of a successful joint venture deal is fading, an alternative REIT [real estate investment trust] demerger would add significantly less value, and there is a reasonable chance Mitchells announces nothing if trading deteriorates and/or property values fall further.
"An alternative property company demerger with REIT conversion is only worth 750p, we estimate, less than the 930p joint venture proposal, as there is no cash return, no control over the assets, and property is trading at a big discount to net asset value.
"Mitchells needs to update the market on its plans, and we think the REIT alternative could be confirmed. Shares could rally on a REIT announcement, but we would sell above 700p." The shares now stand at 599.5p, down 7p.
Tchenguiz was recently forced to counter rumours he wanted to sell his stake, while Irish entrepreneurs John Magnier and JP McManus have built up a 4% stake through their Elpida vehicle. Interesting times ahead for M&B shareholders, it seems.
