In an ongoing analysis of Endeavour Group, Morgan Stanley explores the free cash flow (FCF) profile of the Hotels division and management's ability to fund the capex pipeline of the group.

The broker suggests cash flows from Hotels alone is insufficient to fund Hotels capex, which increases the odds of other funding options including freehold divestments.

At the same time, potential interdependance of funding between divisions reduces the medium-term possibility of a change to Endeavour Group's corporate structure, explains Morgan Stanley.

The freehold sale alternative would be a positive share price catalyst given recent shareholder concerns around capital discipline, in the analysts' view.

Morgan Stanley's $5.80 target and Equal-weight rating are maintained. Industry view is In-Line.

Sector: Food & Staples Retailing.

Target price is $5.80.Current Price is $5.37. Difference: $0.43 - (brackets indicate current price is over target). If EDV meets the Morgan Stanley target it will return approximately 7% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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