In a note, analysts at the Canadian bank said over 80% of the FTSE 250 chain’s underlying earnings (EBITDA) was exposed to “growth segments of Wagamama, pubs & concessions”.
“Previously, investors would have paid 14x [price earnings ratio] for a business where 50% of the EBITDA was exposed to the challenged leisure operations given 57% of these sites are retail based. However, post acquisition, the stock trades at 9.6x 2020e P/E with significantly enhanced growth prospects and a 4% yield.”
The bank added that the acquisition had reduced RTN’s struggling leisure business to less than 20% of its EBITDA while also demonstrating Wagamama’s “high like for like sales growth with its leading market position in Asian food”.
Analysts also said that they expected “synergies and expertise in delivery” to generate £22mln of incremental EBITDA by 2021.
In late-morning, Restaurant Group shares were flat around 151.5p.