Enterprise Inns Plc (ETI), the best performer in the FTSE All-Share Index this year, rose to the highest in 22 months after Morgan Stanley (MS:US) upgraded the pub operator’s stock and almost doubled its 12-month price target.
The shares rose 5.1 percent to 98.25 pence, extending this year’s gain to 251 percent and giving the Solihull, England- based company a market value of 497 million pounds (797 million). Almost 1.4 million shares were traded, 76 percent more than the daily average during the past three months.
Investors will be attracted to the stock as income from Enterprise’s pubs stabilizes and it repays debt, analyst Jamie Rollo said in a note to clients today. He raised his recommendation to overweight from equal-weight. The company, founded in 1991, has about 6,000 pubs under management, according to its website.
“Enterprise’s debt levels are undeniably high,” said Rollo, who raised his price prediction to 140 pence from 75 pence. “However, we think the debt level is becoming much more manageable. We see it being paid off by 2015.”
Enterprise has been hampered by 2.7 billion pounds of debt and falling like-for-like sales as consumer spending declined in the wake of the global financial crisis. That prompted a 96 percent slump in the share price between the end of 2006 and the end of last year.
Enterprise has 335 million pounds of bank debt and 2.4 billion pounds of bonds. It should be able to refinance or partially repay a secured 600 million-pound corporate bond maturing in 2018 as the bonds will probably be trading nearer face value, Rollo said.
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