C&C shares up as Dresdner lifts rating

Shares in Irish drinks group C&C Group rose by almost 5.6 per cent in the first hours of trading after Dresdner Kleinwort raised its rating on the stock to “buy” from “hold”.

Dresdner increased its recommendation on the manufacturer of Bulmers cider in Ireland and Magners cider in the UK to "buy" from "hold", according to a research note distributed to clients.

At 9.03am shares in C&C were up 5.57 per cent at €2.55, reversing much of the 11 per cent suffered last Friday, which brought the stock to 4 year low. C&C shares fell 70 per cent last year.

Dresdner analysts led by Dennis Weber said that with shares trading at about the same price as when they were first sold for €2.26 in May 2004, a bid looks "increasingly likely".

"We see such a move as especially likely, given the continued attractiveness of the overall cider market,'' the analysts said. "A larger company with a stronger distribution platform could potentially achieve a turnaround."

Mr Weber said a further negative statement by C&C at the end of August could "trigger" a bid.

The market cap of the cider maker is around €800 million, just a fifth of its high in January 2007 when the stock was trading at over €14.

Goodbody analyst Liam Igoe has cut his forecasts for the stock on the basis that a deteriorating economic on both sides of the Irish Sea along with a wet summer means there was likely to be a "small decline in cider volume sales".

He said the earnings per share (EPS) forecast this year and next was flat and for 2010 the EPS has been cut from 35.2 cent to 31.7 cent.

Although the 12 month share price target was reduced to 400 cent, Mr Igoe maintains a "buy" rating on the stock.

Last Friday C&C Group said revenues for the four months to the end of June were 8 per cent lower than the same period in 2007, due to a fall in cider sales.

Additional reporting Bloomberg