Broker snap: Enterprise Inns preferred by Credit Suisse

20th May 2009 11:56

Credit Suisse has been running the rule over pub groups as the sector has returned to favour, in line with the market's enthusiasm for the recovery prospects of highly geared companies.The Swiss bank reckons that the pub groups are likely to see further declines in rental income and property values this year, which will impede the rate of recovery.It highlights Enterprise Inns as its preferred stock in the sector. It expects the stock to out perform and has a price target of 224p.'Our preferred pick is Enterprise Inns, as we forecast the group will make progress reducing debt ahead of the May 2011 refinancing. As such, we expect its 2010 estimated calendarised P/E multiple of 4.5 to increase,' the bank said.It also raises a glass to JD Wetherspoon, rated 'outperform' with a price target of 448p, and Punch Taverns, which has a price target of 184p.It is less keen on the pub group/brewing combos Greene King and Marston's, both of which have 'neutral' ratings. The former has a price target of 464p, and the latter a price target of 172p.Meanwhile, pure pubs group Mitchells & Butlers gets the thumbs down, on the basis of its high exposure to food sales and the high proportion of mid-market pubs. Credit Suisse expects the stock to underperform and has a price target of 232p.