Upgrade boosts C&C

Shares in drinks and snacks maker C&C jumped almost 7 per cent yesterday after its price target was upgraded by a London-based brokerage.

Deutsche Bank raised its price target for the company's stock to €5 from €3.50, citing the potentially strong growth of its Magners cider in the UK. C&C shares closed up 27 cent yesterday in Dublin at €4.27.

"The future prospects of the company hinge upon the success of their star cider brand Magners in the UK," Deutsche analysts said. "So far all the evidence is very encouraging."

Deutsche said it believes Magners has the potential to take a 10 per cent stake in the UK cider market, an area that is estimated to be worth about £1 billion (€1.44 billion).

The bank said the potential of Magners has yet to be reflected in the longer term valuation of the company and the succesful rollout "would enable the company to sustain high single-digit growth in earnings before interest, and low double-digit earnings growth over the next 10 years".

C&C, which launched Magners in the greater London area in March, said in May it was targeting the second half of next year for Magners to break even in the south-east of England.

It also said sales of Magners rose 61 per cent in the year ended February and accounted for half of the profit increase in the group's cider division.

Overall the cider unit posted a 12 per cent increase in operating profit, as sales of Bulmers, as the cider is known in the Republic, also rose, bucking the overall decline in the Irish long alcoholic drinks market.

However, Deutsche's analysts did say they expect earnings to remain depressed for the next two years because of the high marketing costs associated with the rollout of Magners.