JAMIE ROLLO | MORGAN STANLEY
We initiate on the newly demerged Spirit Pub Company at “underweight” as we see structural reasons for its low margins. Free cash flow generation is very weak relative to EPS (we do not think it should pay a dividend). Its exposure to leased pubs makes it less attractive to other parties.
SIMON FRENCH | PANMURE
Following the de-rating of some of its peers over the last few weeks, we have reduced our fair value estimate for Spirit to 48-62p per share. Our 83p target price for Punch Taverns was previously predicated on 19p of fair value for Punch and 64p for Spirit. We recommend a hold.
DANIEL HARRIS | H20 MARKETS
Newly demerged Spirit is likely to attract interest as a potential investment case, although with nearly half the exposure of group EBITDA to leased pubs, the upside is likely to be limited, at least until the incoming CFO develops the group strategy. Meantime we view Spirit shares as a hold.