Broker tips: Mitchells & Butlers, Premier Oil, Rathbone Partners

Analysts at Liberum slashed their target price on pub operator Mitchells and Butlers from 600.0p to 300.0p on Wednesday in anticipation of three months of full lockdown followed by a further three months of subdued trading.

Liberum said M&B should have "sufficient" cash resources to fund obligations well into the second half of the year, subject to covenant waivers and noted that lender negotiations were on-going but so far had been supportive.

The investment bank also pointed out that trading had been "solid" prior to the coronavirus-driven closures, with an improvement in asset quality and service driving like-for-like sales growth outperformance, margin improvement and debt reduction.

However, Liberum updated its forecasts based on three months of Downing Street's lockdown and a further three months of "subdued trading", leading it to cut its 2020 and 2021 underlying earnings estimates by 47.9% and 23.9%, respectively.

"Shares have fallen 63% since 21 February. Prior to Covid-19, M&B had continually outperformed its peers, whilst improving its estate quality and net debt reduction," said Liberum, which reiterated its 'buy' rating on the group.

"This should ensure the company bounces back quickly post Covid-19."

Premier Oil's outlook is unclear after a mixed trading statement, Berenberg analysts said as they kept their 'hold' rating on the company's shares.

The oil explorer told investors it expected to be cash flow neutral in 2020 with the help of hedging but it also reduced its production guidance to 65-70 thousand barrels a day (kboepd) from 70-75 kboepd in March.

James Carmichael, Berenberg's analyst, said Premier's guidance was that production would dip to just under 70 kboepd rather than a full 5 kboepd drop.

The statement also raised questions about Premier's UK acquisitions and proposed extensions to its debt maturities after the company's biggest creditor opposed the plan.

Carmichael said "the outlook remains unclear" and that more information was needed on the issues raised in the statement. He kept his price target at 30p a share.

"Cost savings and cash flow benefits are positive but reduced production guidance is unhelpful, as is ongoing uncertainty about the UK acquisitions from BP and Dana, and the related May 2021 debt maturity," Carmichael wrote in a note to clients.

"Consensus will clearly need to adjust to the lower production outlook, while clarity on alternative options for the debt maturity would be encouraging."

Analysts at Canaccord Genuity upgraded their recommendation for shares of wealth management group Rathbone Partners from 'hold' to 'buy'.

They pointed to the company's continued investments to upgrade its capabilities and the likelihood that it would continue to carefully participate in the consolidation of its sector as reasons to buy into the stock - in turn, meaning the group would benefit from scale.

"We believe investors looking for medium-to-long-term buy and hold stocks should look closely at the wealth management sector and, at this price, Rathbones in particular," they said in a research note sent to clients.

They also highlighted valuation support from the firm's roughly 5.0% dividend yield.

However, in the wake of the company's 2019 numbers and update on first-quarter 2020 trading, they cut their estimate for its 2020 earnings per share by 30% and that for 2021 by 28% and lowered its target price from 2,049.0p to 1,846.0p.