LONDON (ShareCast) - (Sharecast News) - Analysts at RBC Capital Markets raised their price targets on a number of British pub and restaurant chains on Friday but noted that the sector now appeared to be fairly valued.
RBC raised its target price on shares of Domino's to 350.0p from 330.0p and labelled the firm its preferred stock in the pub/restaurant space. However, RBC cut its recommendation on the stock from 'outperform' to 'sector perform', arguing that the group's relationship with franchisees still required "attention".

In parallel, the Canadian broker hiked its price target on Mitchells & Butlers to 450.0p from 325.0p and raised its rating on the firm from 'underperform' to 'sector perform', stating the firm had demonstrated "very robust" trading in a tough market as the benefits of its capital-investment plans came to fruition.

RBC also highlighted that M&B was the only pub company that saw earnings upgrades in 2019.

"Valuations put it at the middle of its long-term trading range for PE and EV/EBITDA with the revaluation justified by the trading performance and sector rerating from the Greene King and EI Group takeovers," said the analysts.

As far as JD Wetherspoon was concerned, the broker upped the firm's target price to 1,550.0p from 1,300.0p but maintained its 'underperform' rating on the stock.

RBC said Wetherspoon's had been in the "sweet spot" of being a wet-led value operation and had seen strong like-for-like growth. However, earnings progress over the last ten years had benefited from lower interest rates, buybacks, leasehold reversions and lower tax rates.

"EBITDAR margins remain under pressure having fallen 540bp in the last 10 years with minimum-wage increase another headwind," said RBC.

The analysts also bumped their target price on Marston's from 120.0p to 130.0p but lowered their recommendation for the shares to 'sector perform' and cut their price target on Restaurant Group from 180.0p to 170.0p while stripping it of its 'outperform' rating and lowering it to 'sector perform'.

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