JPMorgan more optmistic on UK pubs, upgrades Mitchells & Butlers

3rd Apr 2014 11:29

JPMorgan Cazenove has lifted its recommendation for Mitchells & Butlers from 'neutral' to 'overweight', saying that it is taking a more positive view on the UK pubs and restaurants sector.The Asda tracker of UK discretionary income was up 3% in February, representing the strongest growth for over a year, the bank highlighted."Combined with strong Christmas trading updates and the easy comps ahead, this gives us cause for optimism on the trading outlook for the UK pub and restaurant stocks," JPMorgan said.This benefit is expected to be seen across the sector, despite current consensus forecasts not factoring in any acceleration in like-for-like (LFL) sales growth.As for Mitchells & Butlers, the bank said "upcoming catalysts" could drive a re-rating of the stock to the sector-average on a price-to-earnings basis, having traded at a 20% discount to peers for last three years.These catalysts include: a reversing of its trading underperformance against the sector; a resolution to ongoing pension renegotiations; and a reinstated dividend "in time".The target price for the stock has been raised from 460p to 530p.Restaurant Group is also rated 'overweight', while Greene King and Marston's are labelled 'neutral', all of which are expected to report positive LFL trends in their upcoming trading updates and results.BC