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magazineWill EI Group pay a special dividend after selling 370 pubs?
EI Group (EIG) 202.5p
Gain to date: 18.4%
Original entry point: Buy at 171p, 8 November 2018
UK pub operator EI Group (EIG) has announced the long-awaited sale of its commercial properties portfolio for £348m.
The portfolio of 370 sites is being sold to US hedge fund Davidson Kempner Capital.
The sale price is in line with book value and is the equivalent of 13 times earnings. The money will be used to reduce debt and analysts think it could also potentially fund a special dividend.
EI currently trades at a 40% discount to its net asset value (NAV) of £1.5bn. Canaccord Genuity analyst Nigel Parson says: ‘We would expect the discount to narrow as the market becomes more comfortable with the robustness of the NAV.’
Liberum analyst Anna Barnfather says the property disposal is a significant event. She comments: ‘Ei Group’s successful disposal of a large portfolio of commercial properties is a game changer, allowing more rapid deleverage and leaving scope for cash returns to shareholders while underscoring the underlying net asset valuation of the group.
‘This is not a one-off, but should now be an ongoing strategy transferring value from debt holders to shareholders.’
Shares says: Keep buying.
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