Takeover bid "too low", says Shore Capital12 Oct 2023 12:39
Shore Capital analyst Greg Johnson pointed out that the value represents an EV-to-EBITDA ratio of 8.6x on current-year estimates, falling to just 7x next year.
"We do not believe it reflects the quality of the estate (especially having recently exited the challenged leisure business), the freehold asset backing (c£160m) and the progress it was making across its strategic objectives on margin accretion (250-350bps) and deleveraging (under 1.5x EBITDA)," Johnson said.
If the company was to hit its targets, it would improve EBITDA to around £130m within three years, up from £83m last year. This would mean the EV would rise to around 100-120p per share, based on an EV-to-EBITDA multiple of 7-8x.
"Importantly, improving profitability would be expected to lead to a significant step-up in cash generative capabilities underpinning rating expansion."
Johnson said that 80p a share would be "a starting point more consistent with the longer-term opportunity".