Some good news at last for struggling Punch Taverns: analysts at Evolution Securities have issued a positive note on the company.
What is more, the news has helped lift Punch to the top of the FTSE 250 leaderboard, with its shares up 3.7p at 125.1p. Nigel Parson at Evolution has raised his recommendation from sell to buy, and his target price from 120p to 160p. He said:
"What's changed? We have always argued that there is a good business inside Punch but it would take years to get there. What's different is that in the last quarter Punch has had a successful rights issue, sold around 400 pubs and it has retired around £1bn of debt, some 25% of its debt mountain. Trading may well collapse to nothing in a significant percentage of its estate, but the asset value for alternative use doesn't.
"The growing debate about Punch will focus on its net asset value. We expect impairments on the tail of the estate but the core estate is unlikely to be impaired as valuers will disregard valuation peaks and troughs, preferring instead to focus on the long term cash flows of good pub assets on commercial 20-year FRI [full repairing and insuring] leases."
But Mitchells & Butlers has slipped 3.4p to 280.8p despite the company saying its full year earnings would be ahead of market expectations of around £83m. Charles Stanley said:
"Management previously highlighted its concerns over UK unemployment prospects and clearly unemployment remains an ever present risk. Today's outlook statement seems to suggest little other than continued limited visibility."
