JPMorgan Cazenove downgraded Restaurant Group to ‘neutral’ from ‘overweight’ on Wednesday, after reviewing its largely unchanged forecast following a model update for the FY20 results and the £175m capital raise in March.
JPM said its new model now captures higher cost of debt following the refinancing, as well as the increased share capital.
The bank said its new target price, which has been lifted to 120p from 95p, is close to current trading levels, leaving limited potential upside.
“We argue that price target and trading multiples fairly capture the company’s strong efforts to weather the Covid-19 storm, but also price in recovery from here to pre-Covid levels in FY22E,” JPM said.
“In the absence of further upside to this scenario, we downgrade the shares.
“In our view, future catalysts could be results evidencing the speed of recovery.”
At 1005 BST, the shares were down 4.2% at 118.20p.
