Broker tips: The Restaurant Group, Standard Life Aberdeen

RBC Capital Markets initiated coverage of Restaurant Group at 'outperform' with a 200p price target on Thursday, as it said the company has been "transformed" by the acquisition of Wagamama, which completed at the end of November.

RBC said the Wagamama deal was a game changer and estimated that by 2021, it will account for 45% of the merged group's EBITDA.

The Canadian bank said the deal "materially improves" the growth profile, with over 80% of the combined group's EBITDA exposed to the growth segments of Wagamama, pubs & concessions.

"Previously, investors would have paid 14x price-to-earnings for a business where 50% of the EBITDA was exposed to the challenged leisure operations given 57% of these sites are retail based.

"However, post-acquisition, the stock trades at 9.6x 2020 estimated P/E with significantly enhanced growth prospects and a 4% yield."

RBC reckoned that the synergies and expertise in delivery will generate around £22m incremental EBITDA by 2021. It pointed to Wagamama's above-peer growth and the fact that it has sustained average like-for-like growth at 9.6% since FY15, outperforming the industry.

Standard Life Aberdeen was downgraded to 'equal-weight' by analysts at Morgan Stanley on Thursday, stating that recent efforts by management to unlock further shareholder value had failed to drive the stock's performance.

Morgan Stanley said its previous 'overweight' rating was built on free optionality on flow turnaround and the potential for management action to unlock that very value.

Although the investment bank expects growth in the core 'Staberdeen' asset management unit in the long-term, it identified several challenges in the short-to-medium term given increased outflows from high-margin products and an overall deteriorating market environment.

"Whilst we believe management has improved shareholder value/returns, e.g. buybacks and debt reduction, this has not driven share price outperformance, as outflows from the core ASI business accelerated through 2H18," said MS.

"With limited visibility on flow/performance turnaround and potential disposal of listed stakes, and our new FY19-20 forecasts ~20% below consensus, the risk-reward no longer appears attractive."

MS also noted that a deteriorating macro environment was a "clearly negative" rick for asset managers moving forward.

Morgan Stanley dropped its target price on SLA from its previous 330p mark down to 255p per share.