Register for Digital Look

Citi says buy The Restaurant Group and 'take the medicine'

By Sean Farrell

Date: Monday 29 Jun 2020

Citi says buy The Restaurant Group and 'take the medicine'

(Sharecast News) - Citi kept its 'buy' rating on The Restaurant Group but cut its target share price by a quarter with uncertainty about consumer behaviour hanging over the restaurant sector.
The UK government is allowing pubs and restaurants to reopen on 4 July subject to relaxed social distancing rules. Citi said the timing was expected but that openings would be phased over coming weeks starting with pubs.

Advising clients to "take the medicine then wait for the recovery" Citi analysts left their 'buy' rating intact but reduced their price target on The Restaurant Group shares to 75p from £1. They estimated it would take until the 2022 financial year for revenue per site to be restored.

The analysts cut their estimates for earnings before interest and tax by 61% for 2021 and 29% for 2022.

"The reduction of the social distancing requirement from 2m to 1m should enhance industry capacity utilisation from c30% to c70% but the unknown element will be consumer appetite to visit restaurants," Citi's James Ainley and colleagues said in a note to clients. "Upside and downside risks [are] apparent."

Citi published its note on the day The Restaurant Group announced creditors had voted for a company voluntary arrangement that will close 125 poorly performing eateries and allow the company to renegotiate rents and leases with landlords. The group is closing branches of tired brands such as Frankie & Benny's and Chiquito's to concentrate on Wagamama, the popular chain it bought at the end of 2018.







..

Email this article to a friend

or share it with one of these popular networks:


Top of Page