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Punch Taverns (PUB) 572.5p

Subdued trading in the past six months has forced analysts to downgrade earnings forecasts for the pub operator. (Read the full story: www.sharesmagazine.com/node/2896)

Shares says: The smoking ban and consumer spending slowdown is tricky for pub operators. Quality players, including Punch, will survive but bruises will be nasty. When negative conditions bottom there will be leisure buys on recovery potential and low valuations. SPECULATIVE BUY.

The Times says: At less than eight times current-year earnings, Punch sits at a discount to Enterprise and the rest of the sector. Weakness in the managed estate implies a £20 million hit to profit forecasts but Punch flagged £10million of extra cost savings from cutting central overheads. It emphasised it had no short-term borrowings or longer-term financing requirements. With like-for-like comparisons likely to ease against last summer’s poor weather, and January and February set to mark the peak of the smoking ban fallout, it should be right to buy Punch – down nearly 60% since May – some time over coming months. But concern that managed pubs could trigger further downgrades in the interim means Punch, at 587p, can be no more than a “hold” for now. HOLD

The City: Investec says: The trading update is weaker than expected, particularly in the managed division, where like-for-like sales are down around 5%. We are downgrading our estimates by 8-12%, despite the emergence of an additional £10 million of cost savings. While there is a risk of further downgraded, we think Punch’s exposure to the leased model will ensure it is more insulated through a slowdown than its peers. BUY