Stock Market News
Numis sees upside at Mitchells & Butlers through Orchid deal
16-06-2014 11:08
Add To Google +1 | Tweet |
Numis Securities has maintained a 'buy' rating for Mitchells & Butlers (M&B) and upgraded its forecasts after the pub group's £266m acquisition of the Orchid Group estate.
The broker said "the deal is a good one for M&B", buying 173 of Orchid's 220 pubs, adding food-led brands including The Great British Carvery, Thai Dragons and Oriental Restaurants and All Inns.
While it pointed out that M&B is paying a "full price" for Orchid, valued at 12.7 times operating profits, this is a price it can "comfortably afford".
"M&B has paid a full price for Orchid, but the deal works for M&B due to the 1% financing cost, potential synergies and re-branding opportunities.
"In addition to integrating Orchid, M&B must now target stronger LFL sales in its own estate and ensure a speedy resumption in the dividend."
The broker said that the estimated £6m of synergies from the deal could be a "conservative" target.
The full benefit of the transaction will be seen in 2017, it said, with synergies and the trading potential from rebranding adding at least £30m to group pre-tax profit, compared with the £184m M&B earned in the year ended September 2013.
Numis kept a 525p target price for the stock, which was trading 0.7% lower at 404.3p by 11:07 on Monday.
BC
The broker said "the deal is a good one for M&B", buying 173 of Orchid's 220 pubs, adding food-led brands including The Great British Carvery, Thai Dragons and Oriental Restaurants and All Inns.
While it pointed out that M&B is paying a "full price" for Orchid, valued at 12.7 times operating profits, this is a price it can "comfortably afford".
"M&B has paid a full price for Orchid, but the deal works for M&B due to the 1% financing cost, potential synergies and re-branding opportunities.
"In addition to integrating Orchid, M&B must now target stronger LFL sales in its own estate and ensure a speedy resumption in the dividend."
The broker said that the estimated £6m of synergies from the deal could be a "conservative" target.
The full benefit of the transaction will be seen in 2017, it said, with synergies and the trading potential from rebranding adding at least £30m to group pre-tax profit, compared with the £184m M&B earned in the year ended September 2013.
Numis kept a 525p target price for the stock, which was trading 0.7% lower at 404.3p by 11:07 on Monday.
BC
Related share prices |
---|
Mitchells & Butlers (MAB) share price |
Stock News is provided by Digital Look Corporate Solutions from Sharecast news. Please read the terms and conditions of useage of this data. Republication or redistribution of content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Digital Look Ltd.
Get a free widget for your website with our latest headlines.
You can now add our live prices and new headlines to your website.The news widget features quotes for Oil prices, spot Gold price and Indices plus a choice of news channel for healines.
Top Shares pages
- Share price quotes
- Share charts
- Share watch list
- Company Results Calendar
- Top Large UK Shares
- UK Market Sectors
- Stock market news
- Company news
- Share tips
- A-Z company search
More share features
POPULAR Share Prices
- Royal Mail share price
- Lloyds share price
- HSBC share price
- Barclays share price
- Prudential share price
- Santander share price
- RBS share price
- Diageo share price
- Standard Life Share Price
- BP share price
- Vodafone share price
- British Airways
- Centrica share price
- Tesco share price
- Taylor Wimpey Share Price
- National Grid
- GKP Share Price
- Marks and Spencer
- Rolls Royce
- Rio Tinto
- Morrisons Share Price
- Aviva Share Price
- LGO Share price
- Tullow Oil Share Price
- SXX Share Price
- Easyjet Share Price
- Next Share Price
- Thomas Cook Share Price
- SSE Share Price
- IAG Share Price
- Bat share price
- Monitise Share Price
- Kingfisher share price
- Dragon Oil share price
- UKOG share price
- SOLG share price