Mitchells & Butlers PLC (LSE:MAB), the hospitality operator, is an “attractive” industry player, reckons Liberum which was impressed by its sales growth in the first three quarters of its 2023 financial year.
Falling costs and rising sales were enough to send the share price more than 8% higher on Thursday, with revenues in the year-to-date 10% greater than pre-pandemic levels.
Strong third quarter like-for-like sales growth of 9.7% impressed Liberum because it's “the first ‘clean’ comparative period, unaffected by Covid or VAT” and signalled a performance ahead of the wider market.
Liberum’s guidance for underlying profits in 2023 and 2024 increased by 5% and 8% respectively, meaning a 6.8% growth in the next quarter is required to achieve this year's predictions.
A £50mln increase to the Harvester owner’s rolling credit facility, which is now at £200mln until July 2026, and the completion of a pension buy-in has “further reduced uncertainty,” according to the UK bank.
“The shares are attractive, trading on 2023 EV/EBITDA of 8.3x, falling to 7.0x in 2024. This is towards the lower end of the pub sector, which trades on an average of 9.0x and 8.0x,” the broker said.
Based on these factors, Liberum lifted the London-listed firm's share price target from 250p to 310p, representing around a 35% upside to the current stock’s value.
Shares in the group opened at around 230p on Friday but slipped a little over 2% before lunch.