Panmure Gordon has reiterated its ‘sell’ rating for pubs group Mitchells & Butlers ahead of the company’s first-quarter trading statement next week.
The broker expects M&B to have traded ‘solidly’ over the Christmas and New Year period but said that it would have continued to lag the peer group in terms of like-for-like (LFL) sales growth.
Following industry data and results from other companies in the sector, combined with two weekends of snow, Panmure now expects year-to-date LFL sales to fall by 1.0%, down from the previous 1.0% growth forecast.
For the full year, the broker expects M&B to report a profit before tax of £178m, slightly below the £181.2m estimate.
Panmure said: ‘The market thinks M&B represents good value because the P/E is low at 9.1x but the adjusted EV/EBITDAR of 7.5x is a premium to managed pub and restaurant peers.
‘The market seems content to ignore that the group has an over-£600m pension deficit, returns are below WACC and, unusually for a pub company, it trades at a premium to its NAV.’
The broker has a 225p target price for the stock, implying a downside potential of around 27% from today’s prices.
Shares were trading 0.06% lower at 310p by 11:19 on Friday.