Enterprise Inns Share Discussion Threads

[layer cake] 26/8/2010 15:44

the share price has been way over trashed here.

[timbo003] 25/8/2010 05:36

Yes Punch had a remarkable day yesterday, but ETI didn/t follow, which is a bit surprising

Meanwhile, here is a bit of good news for all pub shares, hurrah!

[jeffian] 13/8/2010 10:52

fjgusto,
I do still hold some of these but if I asked myself the question 'would I buy?' at the moment, I think the honest answer has to be 'no'. The company has been in fire-fighting mode these past 18 months or so, selling down assets to reduce borrowings to appease the market (though in its heart I think ETI feels there's nothing inherently wrong with its debt levels) and trying to stabilise revenue which has been under attack from pressure on rents, beer volumes and wholesale margins. What it now needs to do going forward is to come up with a vision of where it's going. Even if trading is stabilised at this level, in the foreseeable future rents are at best flat and at worst remain under pressure, beer volumes are likely to continue to decline and the continued threat of regulatory interference in the tied model suggests they will have to give away more margin to their tenants. Unless and until they pay a divi again, the only thing they have going for them at the moment is the discount to NAV in the share price, but even that is not that attractive unless they can show they have a plan to extract it for the benefit of shareholders! It's hard to swallow selling £3 of asset value for under £1 which is why I continue to hold at the moment, but I'm really looking to management to come up with a compelling 'story' for the company going forward if they're not going to begin to face shareholder pressure to sell the whole bl00dy lot over time and return the surplus cash to shareholders.

[jeffian] 12/8/2010 17:25

The fall isn't specific to ETI, fjgusto, the whole sector has moved in pretty much the same way.


Do I think it's to do with the Russian grain export ban / barley price fluctuations? Probably yes, among other things. Talk of a "£4 pint" don't help the industry and when you get it combined with a raft of gloomy sales, confidence and employment statistics and renewed speculation about double-dip recessions, I suppose it's inevitable that sentiment will move against such a consumer-facing business.

[timbo003] 22/7/2010 16:32

Been tracking these for absolutely ages, bought a few (17.5K) today, wish I had done it yesterday!

[jeffian] 21/7/2010 09:59

When you've got a minute, spob.............

jeffian - 20 Jul'10 - 18:01 - 369 of 373 edit


Well what do you think is the "right" level of debt and why?

If you were buying a house (or pub!), how much of the purchase price would you be prepared to borrow?

[layer cake] 20/7/2010 22:37

try all of them.
this market should be put down like an old dog.

[the_doctor] 20/7/2010 20:44

Yes, rather like a venture capitalist does - only I dont put the money in and have an available exit

I keep check on this vaguely, as I think it could provide decent trading opportunities. Havent gone for any of late though. I'm pretty bearish on the UK's outlook, so would typically look to buy any oversold/sharp dips.
Where exactly those are is the question of course.

[jeffian] 20/7/2010 20:35

Hi, doc,

This isn't your sort of stock at all. It's highly cash-generative whereas I think you only specialise in companies which burn cash, don't you?

8-)

[the_doctor] 20/7/2010 19:42

How long you going to keep ramping this POS jeffian??

(just kidding ;o))

I happen to agree that there's no problem with affordable debt
The question is what is affordable, since what appears affordable now may not be affordable later if performance slips - that's not to say ETI isnt in an ok position

[jeffian] 20/7/2010 18:01

Well what do you think is the "right" level of debt and why?

If you were buying a house (or pub!), how much of the purchase price would you be prepared to borrow?

[spob] 20/7/2010 17:55

Yes, i am very much anti, "this much debt" !


the directors clearly dont appreciate or care about the level of ETI debt

they are only concerned with paying "THEMSELVES" dividends

[jeffian] 20/7/2010 17:44

spob,

Why not? I can see from your header that you're 'anti-debt' but is affordable debt a bad thing? (if the answer to that is 'yes', bang goes the mortgage and housing market!). ETI's debt is a mixture of short-term bank debt and long-term securitised bonds, the latter representing the majority and amortising over terms up to 21 years. If ETI paid back £200m/year, they'd clear their entire debt in 17.5 years (at which point some bright spark would accuse them of having an 'inefficient Balance Sheet' and recommend that they gear up............!).

[spob] 20/7/2010 17:28

Might asswell relpace the directors with the monkeys from london zoo

results would be much the same



How can they even think about paying dividends

idiots

[jeffian] 20/7/2010 17:06

Quite a solid IMS today and the share price has reacted reasonably positively ('tho it often seems to then slips back until the next announcement). I thought there were two particular positives to take from it -
1) Trading seems to have stabilised in Q3 and, in the Q&A session after the presentation, they said they expected earnings in Q3 and Q4 to be 'flat'. Not very exciting, I know, but a great improvement on the downward trend we have seen for a couple of years now.
2) They continue to sell quite substantial numbers of pubs - both 'top-end' via sale and leaseback and bottom-end pubs from the 'tail' of the estate - and "These sales continue to achieve proceeds significantly ahead of book value".

The conclusions one can draw from this are that the quoted NAV of £2.76/share looks realistic and, if earnings stabilise at around 25p/share, such a figure would not be an unreasonable target representing a PER of 11x. If ETI could see a way to re-start divis, there would be a solid investment rationale for the share. In answer to a question about when divis would re-start, Ted Tuppen said it would be considered at the Board meeting prior to the Preliminary Results (16 November). He has already said that he wants to reinstate divi as soon as possible and today he said it depended on 3 things -
1) availability of cash (which he answered for himself was 'not a problem')
2) he was consulting shareholders to establish their preference for a divi or continued debt reduction and
3) it would only be sensible to re-start one if it can be maintained.

If earnings stabilise at 25p/share, my personal opinion is that I would like to see a divi re-started at, say, 5p/share. That would be covered 5x by earnings and, at a cost of £25m, would seem a fairly modest reward to shareholders (who've had a pretty torrid couple of years) while still leaving plenty to run the business (it's heading towards £200m/£250m net cashflows after investment of £50m into the estate and debt repayments). That would give a reasonable return to support the share price, would be sustainable, and if debt concerns ease, would allow divi growth up to 10p if they went back to their previous policy of paying out divis 2.5x covered.

[crosswire] 01/7/2010 12:26

Analyst Consensus 12 Month Target Price

The 17 analysts offering 12 month price targets for Enterprise Inns PLC (ETI:LSE) have a median target of 120.00, with a high estimate of 240.00 and a low estimate of 85.00. The median estimate represents a 37.22% increase from the last price of 87.45.

[kiwi2007] 26/6/2010 11:08

Locally Enterprise have managed to run down and ruin their 4 local pubs by putting poorly paid and socially inadequate management in to run them. Enterprise, I am reliably informed, receive no rental income from those 'running' the 4 pubs and wet sales are well down as most decent customers have left.

They really can't run the proverbial in a brewery and, at least locally, are partially to blame for the deterioration in the quality of village life. The sooner the banks pull the plug the better, all IMO of course :o)

[layer cake] 18/6/2010 15:02

thanks man.
looking at other property stocks; they are not doing well either so perhaps retail, commercial & private are currently not in flavour.

[jeffian] 17/6/2010 13:43

Yes.

Perceived to have too much debt and, although it is still generating reasonable earnings, it is not paying dividends and diverting all cash to debt reduction. Add in that it is not yet clear that trade has stabilised, that even if it has it is hard to see where growth will come from in the short term, and that there are still regulatory threats hanging over the 'tied estate' model, and you have a pretty good basket of reasons!

I hold, btw.

The other side of the coin is that they have a NAV/share around £2.50 based mainly on freehold property and they are doing deals at or around Book Value which suggests valuations are realistic; they are highly cash generative; if the banks are relaxed about future funding, they may be allowed to resume paying a divi; the threat to the 'tie' - which has recently been approved again by both the OFT and the European Commission - may be overdone.

Take your choice. Some people still think this could go belly-up; others think it won't and look at the NAV - two schools of thought lying between 0p and 250p. That might explain why the current share price sits pretty well equally between the two!