Barclays has turned cautious on pubs operator Mitchells & Butlers PLC (LON:MAB) amid worries about deteriorating cash flows at the All Bar One and O’Neil’s owner, sending its shares over 3% lower.
Analysts at the bank have cut their rating for M&B shares to ‘underweight’ from ‘equal-weight’ with an unchanged target price of 220p. In mid morning trading, the stock was down 9.9p at 261.5p.
In a sector note to clients, they said: “We expect capex of £200m in FY17 (vs depreciation of £117m), with the majority of capex being spent on the existing estate rather than new pubs.”
The analysts noted that M&B’s free cashflow yield of just 5.2% is the lowest of the managed pubs and well below that of Barclays favourite player JD Wetherspoon PLC (LON:JDW) at 8.2%.
Targets changed …
Barclays reiterated its ’overweight’ stance on Wetherspoon’s and raised its target price to 1,050p from 1,000p after upgrading its 2017 underlying earnings (EBITDA) forecasts by 4%.
Among the small cap players, Barclays upped its target price for Enterprise Inns PLC (LON:ETI) to 140p from 115p, with its ‘equal-weight’ rating reiterated.
But in the mid cap sector, the bank also cut its target price for Greene King PLC (LON:GNK) to 770p from 910p, while keeping an ‘overweight’ stance, and reduced the target for Marston’s plc (LON:MARS) to 130p from 140p with its ‘underweight’ rating unchanged.
Punch also downgraded …
The bank retained its target price for takeover target Punch Taverns PLC (LON:PUB) at 180p but downgraded its rating for the shares to ‘equal-weight’ from ‘overweight’ as the analysts said that “further upside depends on a raised bid.’
That looks unlikely, however, after investment firm Emerald - which made an approach to buy Punch for 185p a share in December - said yesterday that it has now decided not to make an offer, leaving Dutch brewing giant Heineken as the sole bidder.