Broker snap: Restaurant Group on the menu

3rd Mar 2010 12:34

Charles Stanley has added The Restaurant Group to its menu after the Frankie & Benny's restaurant chain's full year underlying profits came in 5% ahead of the broker's forecast.The broker has crunched the numbers and reckons that with full year sales showing a like for like (LFL) decline of 2% in 2009 that implies a 6% uplift in LFL sales in the final six weeks of the year. The comments on the outlook were 'mildly more positive' which combined with a 1% increase in LFL sales in the first nine weeks of 2010 and indications that airport traffic numbers are picking up has prompted Charles Stanley to upgrade its earnings forecasts, change its recommendation from 'hold' to 'add' and bump up its target price from 220p to 245p. Panmure Gordon is even more bullish on the stock, reiterating its 'buy' recommendation and nudging up the price target to 270p from 260p. The group has made a better than expected start to 2010 and has lifted the upper end of the range for the number of restaurants it expects to open this year. The group now expects to open between 15 and 25 new outlets, though Panmure's earnings projections assume a net 15 units are added to the chain, and that LFL sales and margin growth will be flat.Panmure is forecasting that underlying profit before tax in 2010 will hit £52.1m, an upgrade of around 4% on its previous estimate.