Broker tips: Punch, Rank, Britvic

8th Jun 2011 13:00

Matrix has kept its 'hold' rating and target price of 78p on Punch Taverns, despite the pub operator reporting third quarter figures ahead of expectations.The broker says that while shares should tick up on Wednesday after the results, the valuation of Punch is more dependent on the shape of the business post the demerger process, rather than on current trading.The group announced in March that it is to split itself in two by the end of the summer and sell many pubs, separating the Spirit managed pubs business from the struggling leased operation - Punch."We value 'new Punch' at 0p and 'new Spirit' at 78p and in both cases these figures are very dependent on the disposal values achieved on very large parts of their respective non-core estates," said analyst John Beaumont.Guoco's offer for casino and bingo hall operator Rank Group has gone unconditional, prompting Panmure Gordon to put its 'buy' rating and target price of 204p on Rank under review, saying that this is a very disappointing outcome.Rank revealed today that Guoco's 150p per share offer has received additional 15.6% acceptances and has been declared as unconditional, as Guoco now owns 56.4% of the issued share capital."This is a very disappointing outcome but as we noted on 9 May whilst Guoco said this was not a hostile move, we failed to see how it could not be interpreted as one," said analyst James Cooke.The broker - and Rank itself - have previously said that the offer "significantly undervalues" the group. Panmure's take out estimate was around 248p per share.Britvic has had its target price raised by UBS, who notes that there is less input cost variability in the current year and cost-cutting measures are now in place for next year."We believe Britvic has regained some control of its profitability with its planned £8m in cost savings for 2012FY, though PET (plastic) inflation is still a key swing factor," the broker said."We previously applied a 10% discount to reflect high input cost uncertainty. We remove this discount, which increases our price target from 390p to 430p." A 'neutral' rating is kept.---BC