Restaurant Group shares fairly priced, says Peel Hunt
Peel Hunt downgraded its stance on shares of Restaurant Group, the owner of Wagamama, Frankie & Benny's and Garfunkel's, to 'hold' from 'add' on Wednesday as it argued that the stock is now fairly valued.
FTSE 250
19,719.37
17:09 24/04/24
FTSE 350
4,419.71
17:09 24/04/24
FTSE All-Share
4,374.06
16:44 24/04/24
Restaurant Group
64.80p
16:45 20/12/23
Travel & Leisure
7,630.10
17:09 24/04/24
The broker said the company's first-quarter trading update on 17 May should be "reasonably positive".
It pointed out that its previous 'add' rating was based on the shares being cheap, the fact that Restaurant Group had been rescued by its shareholders and the potential for Wagamama to flatter like-for-like sales for a while.
However, following a bounce in the shares price - the stock rose 2.8% in the 10 weeks to 10 March, the shares now look fairly valued on almost 7x EV/EBITDA December 2019.
Among the risks it highlighted poor underlying trends and said that ex-Wagamama, LFL sales were only flat against a -5.6% comp over the first 10 weeks, with tougher comps ahead. In addition, the broker said its 2019 forecasts assume LFL sales rise by around 2.5%, which leaves no room for Wagamama to slow.
At 1530 BST, the shares were down 4.2% to 135.70p.