City Talk: Rise and rise of a pub group with enterprise

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The Independent Online
Sceptics who knocked the offer for Enterprise Inns, the tenanted pubs group, last November will be kicking themselves again after this week. The shares, floated at 145p, and with hindsight, the remarkably generous yield of 5.5 per cent, have soared. The company bought 413 pubs from John Labatt, the Canadian brewer now owned by Interbrew of Belgium. Enterprise is paying pounds 61.5m, but the stock market loved what it saw: the shares rose 23p to 223p. Broker Kleinwort Benson says the purchase is a steal, and will prove earnings-enhancing from the word go. One factor is that the price is less than the pounds 69m put on the pubs by an independent valuer. Managed pubs will be changed to Enterprise's preferred tenanted relationship. If you missed the chance of buying when the shares were first offered, there is still plenty left to go for. Buy.

FIRST-HALF results from NatWest (617p) due out in July are unlikely to set the market alight. Provisions on Eurotunnel may have been covered in 1995 figures, but new problems will surface: cost-cutting could require provisions of more than pounds 300m, while there will be a loss on the disposal of Bancorp. The business could just break even at the pre-tax level. Avoid.

FLOATED at 160p, shares in Electrophoretics International, a biotech start-up specialist quoted on the Alternative Investment Market, have not experienced the heady rises enjoyed by many of its quoted brethren. Quite right too. Electrophoretics has a different approach and is much more low risk. But since its admission, its price has dropped back to 118p - too low. The company produces protein markers for various diseases, including nerve-related back pain, brain damage, stroke and forms of cancer. These can be used in novel diagnostic tests. For example, the company has an exclusive arrangement with the Ministry of Agriculture to develop a test for BSE in live cattle. Expect a collaborative deal with a pharmaceuticals company to re-inject some fizz into the price.

AN INTERESTING convertible bet at present is the 8 per cent prefs in packaging and labels business Wace. After the group warned of tougher times at its AGM, the shares fell 23 per cent. But the convertible was only off 7 per cent, while the risks for convertible holders seem minimal. Dividend cover, points out Panmure Gordon, is 2.4 times, gearing is only 50 per cent, and the business is cash positive. At 111p, the prefs remain a buy.

FOR trainspotters, today is significant. It marks the first day since 1948 when commuters on the Southend and Tilbury to London railway lines will arrive at Fenchurch Street station on lines operated by a private- sector company in which they can buy shares. Prism Rail shares will start trading on Wednesday, after a placing to raise pounds 8m at 100p a share. Before considering whether to board the gravy train, however, read the warnings on the admission document. Apart from a Labour government's desire to alter aspects of the newly privatised railway operators, there are also possible problems arising from the lack of clear financial data for the train operator companies. However, Prism's management has experience with buses. In all probability this will turn out to be a safe, utility-style investment.

AS FORETOLD by the company, multi-media to rock radio and music outfit Chrysalis saw losses at the interim stage rise to pounds 2.86m, from pounds 2.49m. Sales, however, were up pounds 56.2m (pounds 47.1m). The losses reflect the costs of rebuilding the group after the sale of its music business to Thorn- EMI, as well as some heavy remuneration packages for boss Chris Wright, paid pounds 1m last year, and Steve Lewis, former managing director of Virgin Music, paid pounds 336,000. Whatever the long-term benefits of the group's heavy investment strategy, the inexorable rise in the shares over the past few years must have reached its zenith. Even so, the shares continue to defy gravity, closing up 55p at 540p on Friday. Unless there is a mystery buyer, now is a good time to take profits.