Pizza Express - Lock-down Valuation

All,

Reference to updated analysis here.

Pizza Express are moving ahead with a Part 26A Plan to be heard tomorrow morning at 11 am. 

The plan is likely to be successful and should hand the SSNs and fresh money creditors 98% of the company (excl. mainland China) - future management incentives to be granted.

The CVA previously left the company’s cost position highly flexible for the next years and post-injection the cash balance should be sufficient to fend off some further lock-down measures. Naturally, a risk of further cash needs remains, but as previously stated, the current valuation allows creditors to buy into one of Britain’s favourite QSR chains at a historically low price - even if the next year remains virus challenged.

Lock-down Valuation:

At 63p/£ + Fresh Cash, we get PE for an EV of ~ £350m net or for 4.8x a possible post-virus £80m EBITDA (medium base case). Even if PE spend an entire year with zero revenues, pay down all WC, pay CapEx and pay interest, we’d still hold it at 8.5x that EBITDA. That would require £200m further fresh cash of course and would no longer be a bargain, but what a scenario!

We remain long the SSNs - and with that the entire structure - with 5% of NAV.


Wolfgang

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E: wfelix@sarria.co.uk
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