Broker snap: Rank lacking near-term catalysts

10th May 2011 12:06

Credit Suisse highlights an "attractive story" and "sensible valuation" at casino and bingo hall operator Rank, but keeps its 'neutral' stance saying that the stock is lacking near-term catalysts.Last week, Guoco acquired an additional 11.6% shareholding, taking its stake to 40.8% and forcing a mandatory cash offer for all outstanding Rank shares. However, at 150p per share, Credit Suisse says that the offer fails to include a sufficient premium (1%) for control.The broker thinks that Rank will continue to take market share in a UK casino market which is already growing at 3-5% per annum - which led to upgrades through 2009 and 2010 - but notes that this is now fully factored in to its estimates."The Mecca Full House concept is still largely unproven and machine tax reform facilitating new handheld terminal development and possible cash returns to shareholders are the next positive catalysts, but not until 2012 given the timetable of regulation (VAT appeals, UK machine tax)," the broker said.Nevertheless, the target price is raised to 161p, from 142p.---BC