Credit Suisse initiates coverage on Endeavour Group with an Underperform rating and sets a target price of $5.86. The rating is driven by the company’s variable profit history, capital intensity, wide range for potential profits and hotel gaming regulatory risks.
The broker acknowledges upside risks as the second half performance in retail liquor is likely to be very strong, and pubs gaming activity has the potential to recover strongly, following a period of venue restrictions.
With declining per-capita consumption of alcohol and an already high market share, achieving strong returns with an expansionary liquor retail strategy is challenging, notes the analyst. Also, expansion of Hotels is generally via acquisition and considered to achieve low returns.
Target price is $5.86.Current Price is $6.43. Difference: ($0.57) – (brackets indicate current price is over target). If EDV meets the Credit Suisse target it will return approximately -10% (excluding dividends, fees and charges – negative figures indicate an expected loss).