After the buying binge, Enterprise Inns should avoid a hangover

Enterprise Inns has been out on the lash when it comes to acquisitions. It has been lining them up and knocking them back, and is now the UK's biggest pub landlord, with 5,300 boozers in its estate.

The group got the Government's okay for its latest round, the purchase of 1,860 pubs from Morgan Grenfell, after agreeing to 61 disposals.

The question is whether Ted Tuppen, the chief executive, can get away without a nasty hangover. Certainly, his deals have racked up £1.6bn in debt, and that could prove a thumping headache since it dwarfs the company's stock market value. Sober onlookers think the company will need a big rights issue if it wants to down the rest of Unique Pubs, the 4,200-strong estate sold by Nomura's Guy Hands this year to a venture capital consortium which also includes Enterprise as a 17 per cent shareholder.

So a rights issue will be looming for the next 18 months, and that can't be great for the share price. But there are signs that the scale of any new equity issue may not be as huge as the market has been expecting. A financial update yesterday showed Unique has been able to pay back more of the venture capitalists' investment than expected, and that means Enterprise won't have to when it exercises its option to take control in 2004.

Enterprise makes its money from rents and from taking a return on beer sales to its tenants. Rental income, solid and predictable, is only going to increase in the short term: the average Enterprise inn is 9 per cent more profitable now than it was a year ago.

Many in the industry want tenants to be given more freedom to choose where to buy their beer, rather than being tied in to agreements to buy direct from landlords such as Enterprise. That would jeopardise Enterprise's second income stream, but competition authorities have examined the issue in the past and not found anything untoward.

Because most of its debt is at fixed rates, even a rise in interest rates shouldn't stall the group's increase in interest cover, temporarily below the target 2.5 per cent.

It would take an unfortunate coincidence of accidents to push Enterprise off course. The shares look cheap by most measures and are a hold.

T&S profits from shift in consumer tastes

T&S stores is one of the hidden gems of the retail sector. Low profile to the point of total invisibility it has nonetheless built itself a significant business in convenience stores. Indeed, it now boasts a store portfolio of more than 1,220 outlets including 867 One Stop convenience stores and 353 newsagents, which are now considered non-core. The group's stock market value has risen to £300m.

Led by chairman and co-founder Kevin Threlfall (he's the the T in the T&S) the company claims that there is plenty more growth to come. It is looking to establish 100 new One Stop stores over the next three years, with 20 later this year and another 40 in 2003. On top of this is a store refurbishment programme which will refit 100 shops this year at the cost of £4m, which is lower than had been expected.

T&S has benefited from the shift in consumer habits towards buying food and drink for the evening meal on the way home that day. To capitalise on this further it has been increasing the amount of space it devotes to ready-meals and chilled wines and beers, which yield higher margins.

The group reckons it will benefit from the UK's need of more housing over the next decade. More housing means more neighbourhood corner stores, it says.

The growth is already evident in T&S's results. Half-year figures showed a 20 per cent jump in pre-tax profits to £18.8m with like-for-like sales growth of 4.3 per cent.

There are two negatives. One is that like-for-like sales growth has slowed in recent trading to 3.4 per cent, although this is only in line with the slowdown larger supermarket rivals have been seeing.

The bigger potential negative is increasing competition. Tesco's ambitions to open 1,000 branches of its Express convenience store format could change the competitive landscape beyond all recognition. Of course Tesco won't get there overnight, but it will be an issue in the longer term.

On Seymour Pierce's full-year profit forecasts of £39m, the shares – up 6.5p to 344.5p yesterday – trade on a p/e of 10.

Decent value.

Cap Reg will struggle to narrow discount to NAV

You can't keep a good man down, and there, from the pages of the Capital & Regional website, grins PY Gerbeau, the not-quite-saviour of the Millennium Dome, now running Cap Reg's giant new out-of-town leisure/sports/retail parks, which it calls Xscape.

C&R, like all but the most ossified of property companies, has been casting round for a way of improving its stock market performance. Xscape is part of it, and is typical of C&R's desire to focus on the day-to-day running of retail and leisure properties, using fee income to cover central costs.

It has put its retail park properties into a new fund called The Junction and its shopping centres into a fund called The Mall. The funds are owned jointly with Morley, the fund management arm of Aviva, and new investors are being wooed to dilute C&R's stake. Clinching these deals would be good news, but progress may not be quite as smooth as the market hopes. Property prices have risen since the funds were set up last year, so it will prove tougher to attract other investors.

Results for the year to June showed a loss of £2.8m, because setting up the funds cost about £7.2m. With that out the way, CapReg's progress will be measured by the proportion of its central costs that can be covered by management fees and the performance bonuses which are sure to follow if it keeps its strong record in increasing visitors to its malls.

The shares have outperformed as CapReg returned £94m through buy-backs and, up 2.5p to 281.5p, now sit at a discount of 24 per cent to net asset value, compared to a sector average of 38 per cent. Until the Xscape concept is proven, the company will struggle to narrow the discount further.