Analyst: Enterprise close to turning a corner?

A City analyst has claimed that Enterprise Inns is close to turning a corner — and could resume dividend payments in 2011.

John Beaumont, leisure analyst at Matrix, has issued a "buy" note on the company setting a price targe of 150p-per-share.

He said: "In our view Enterprise is close to demonstrating that it is through the worst of the recent downturn.

"Now that both its underlying trading and balance sheet are improving and it's got to grips with the tail end of its estate, we believe it is in sufficiently good shape to resume dividends and see its Net Asset Value (NAV) improve.

"Although Enterprise will not be updating the market with its usual pre-close update at the end of September, we believe the market can have some degree of confidence that Enterprise will demonstrate that it has turned a corner when it reports its prelims on 16 November.

"Perhaps most importantly, we expect the company to report that underlying profitability has stabilised through the whole of H2 (not just benefiting from the good weather in Quarter Three) and that it is confident of this continuing during Financial Year 2011, even without the benefits of the World Cup.

"We also hope that the company makes some reference to resuming dividend payments in 2011 - starting at its interims next May.

"Furthermore, we expect the company to be more ambitious in its debt reduction aims (through ongoing pub disposals and sale & leasebacks) in order to convince the market that, when its current bank debt facility is up for renewal at the end of 2013, renewing it will be seen as no more troublesome than renewing an overdraft facility.

"We believe it is possible for Enterprise reduce its bank debt to only £125m by the end of 2013.

"After about 2.5 years coping with the debt crisis, industry restructuring and recession, ETI is now at the end of this fire-fighting process. We now believe there are enough catalysts in the pipeline for this stock to start performing."