Douglas Jack at Numis says Marston’s is a buying opportunity following its full-year results yesterday, with medium-long term growth prospects “significantly enhanced”.
Jack said: “Following, yesterday’s share price weakness, the dividend yield is now 4.7%, rising to 5.2% in 2016E, at which point the dividend should be increasing in line with earnings growth.”
He issued a Buy recommendation at a Target Price of 185p.
Jack said: “2013’s debt increase is expected to fully reverse in 2014E aided by disposals. Also, the interest rate on securitised debt now falls each year between 2014E and 2017E.
“Yesterday’s share price fall must be due to the market focusing on 2014E as profits are unlikely to grow in 2014E owing to dilution from the sale of 202 tenanted pubs to NewRiver Retail.
“However, medium-long term growth prospects have been significantly enhanced. Management is absolutely right, in our view, to accelerate wet-led pub disposals (7.6x EBITDA to NewRiver; 15x EBITDA on single site transactions), from which proceeds will be recycled into new build pub restaurants (6x EBITDA cost for strongly-positioned freehold assets). Hence, our forecasts are little changed for 2015E and 2016E, by which point Marston’s earnings and returns growth should be much stronger.”
