UBS initiates coverage of Restaurant Group at buy

The bank said it sees the company as a highly-attractive continuing roll-out story.

“Our bottom-up analysis of the market potential of the group's key brands shows that in an upside scenario, the group's expansion potential could be 4x Restaurant Group’s own targeted increase. This could support double-digit revenue growth for 18 years, assuming 2.5% LFL sales growth.”

UBS said the stock offers a high-quality growth story and management has a track record of delivering strong returns through value-creating new site additions.

The bank reckons a combination of management initiatives to continue driving volume, and a more favourable pricing environment, will see sustainable LFL sales growth going forward, following the average 2.6% LFL growth posted in 2011-14.

It also sees limited risk from wider market supply growth given that total restaurant numbers in the UK are declining, while the Restaurant Group’s predominantly out-of-town locations provide a controlled supply environment.

At 1100 GMT, shares were up 2.8% to 673.50p