Canaccord raises target price on Mitchells & Butlers

Analysts at Canaccord Genuity raised their target price on pub landlord Mitchells & Butlers from 400p to 530p on Thursday, stating better than expected preliminary results showed the firm was continuing to outperform the market.

Canaccord increased its earnings per share forecasts for Mitchells & Butlers 7.9% to 39.0p for 2020 and 7.0% to 40.8p for 2021.

"M&B's better than expected prelims show that it continues to outperform the market due to a broad-based performance, driven by its Ignite self-help programme," said Canaccord.

"We retain our 'buy' recommendation but hike our target price to 530p from 400p; the agreed bids for Ei Group and Greene King at 38.5% and 51% premiums to their last undisturbed share prices are reminders of the latent value of the asset-intense pubcos in general and M&B in particular."

The Canadian broker also noted that performance across all 14 brands was positive, something which has not happened for "many, many years" according to M&B chief executive Phil Urban.

Premium Country Pubs and Miller & Carter were the stand-out performers.

"This is a good performance. Looking forward, we assume +2% L4L sales growth but 20bps of operating margin erosion in FY20E moderating to a decline of 10bps pa for the outer years. The cost pressures remain intense but similar to last year."