UPDATE: Bank of America Merrill Lynch Initiates Coverage on Burger King Worldwide with Neutral Rating, $19.50 PT

In a report published Friday, Bank of America Merrill Lynch initiated coverage on Burger King Worldwide BKW with a Neutral rating and $19.50 price target. BofA Merrill Lynch noted, “We are initiating coverage of Burger King Worldwide (BKW) shares with a Neutral rating and a $19.50 price objective. Our price objective is based on an assumption that BKW shares continue to enjoy premium valuation metrics that investors have awarded it based on better overall management, a transition to a nearly 100% franchised business model, and more aggressive international growth plans. Our price objective represents a 15x enterprise value (EV) to EBITDA multiple based on our 2013 estimate – a rich valuation but consistent with the low-to-mid teen EV/EBITDA valuations we ascribe to the most comparable highly franchised QSR companies – Domino's and Dunkin' Brands. We also note that BKW is trading at a substantial premium to its other QSR peers and positive investor perception of highly franchised business models is critical to BKW's premium valuation metrics.” Burger King Worldwide closed on Thursday at $17.12.