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In the face of tough market conditions the night club operator is making the best of a bad lot

by Dan Coatsworth

Selling off underperforming nightclub sites by Luminar is a sensible move but it confirms how tough the late night leisure market conditions are, says James Dawson at Charles Stanley Securities. His recommendation on the stock has been shifted from ‘reduce’ to ‘hold’ to reflect Luminar’s latest achievement of offloading 26 units to Cavendish Bars. ‘If trading conditions fail to improve then it is possible that sites that were previously marginally commercial could suffer further and be deemed better sold,’ comments Dawson. ‘Having said that, we believe that the deal will be reviewed positively by the market as a means to enhancing estate quality.’

Luminar has denied reports of a management buy out. However, Greg Feehely at Altium Securities reckons that there is a chance of corporate activity, now that it is slimming down to only having the best assets. Richard Carter at Numis upgraded his rating on Luminar to ‘add’ from ‘hold’ following the deal with Cavendish, which is taking on associated liabilities, including lease obligations from reinheriting sites from Candu, a former subsidiary that recently went bust.

The nightclub operator has underperformed the FTSE All-Share by 63% in the past year. Judging by Carter’s price target upgrade from 300p to 333p, analysts are starting to believe the stock slump may have bottomed out.