Newspaper article The Evening Standard (London, England)

Pain for Punch as Analyst Puts Fair Value Tag at Zero

Newspaper article The Evening Standard (London, England)

Pain for Punch as Analyst Puts Fair Value Tag at Zero

Article excerpt

Byline: MICKEY CLARK

PUNCH Taverns got another smack in the face today, courtesy of a feisty City analyst who claimed that a fair value for the stock was zero, and that the company is heading for "zombie" status.

Charles Winston, leisure analyst at Redburn Partners, can claim responsibility for another plunge in the shares of Britain's biggest pubs operator, which at one stage today were down by more than a fifth.

Punch's balance sheet is bloated by debts of [pounds sterling]4.5 billion, a heavy burden for a company rapidly running out of equity and today valued at less than [pounds sterling]150 million.

"We now believe that equity investors will probably never see another penny out of Punch in the form of dividends, buybacks etc," said Winston.

Punch hit back, claiming there were "serious, factual errors" in Winston's report, which went into detail on the status of various securitised debts and claimed a high risk of default.

Winston backtracked a little, admitting he'd misunderstood some of the terms for the repayment of the debt.

But he stuck to his guns on the wider issue, insisting that whatever cash Punch throws off in the next few years will have to go towards servicing debt, which means shareholders should get out before last orders is called, in his view. The shares, which were changing hands for more than 700p just a year ago, today lost 11/2p to 60p.

Shares were generally in positive territory.

An absence of fresh redemptions among hedge funds and the reluctance of institutional investors to open fresh positions ahead of the Christmas break have slowed turnover to a trickle. The FTSE 100 index rose 3.53 to 4370.81.

Housebuilders aren't the only ones at risk of breaking their banking covenants as soaring debts are exacerbated by falling share prices.

UBS warns there are also significant risks on covenants in the equipmentrental sector, which relies heavily on activity in the building and construction industries.

It singles out Speedy Hire, which sank 53/4p to a record low of 1221/4p, and Northgate, which also plumbed new depths, down 13/4p to 861/2p. …

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