A number of leading analysts have reacted positively to this morning’s trading update from Marston’s, with trade as expected slowing in August, but picking up since the end of the first week of September.

Mark Brumby at Langton Capital said: “Tough summer comps have not derailed Marston’s story and, though there is likely to be some edging back of forecasts today, the group’s strongly asset-backed shares offer good value.” There is also reaction from Douglas Jack at Numis and Simon French at Cenkos.

Brumby said: “In line with reports from Greene King, M&B and the Peach Tracker, Marston’s has reported that trading slowed in August. Fortunately, it has picked up since the end of the first week of September and, though higher forecasts for the current year may need to be brought down a little, the cooler summer weather has not materially impacted forecasts.

“Tellingly, there is no suggestion that forecasts for FY15 need be adjusted, the new-build programme remains on track and the dividend yield for FY15 is now sitting at 5%.

“Room, machine and food sales remain robust. Cash flow is good, margins are edging up a little and it is very unlikely that Marston’s would make a takeover approach to Spirit at anything like the premium needed to secure the company.

“Marston’s new-build programme is an exercise in self-help and its geographic footprint means that the company has had little help from a buoyant London market. The bulk of its performance, therefore, is home grown.

“The group has disposed of bottom-end units (this has been dilutive) but growth is set to come through strongly in FY15 and beyond. Marston’s shares trade on around 10.7x earnings for the year just started and shareholders are to be paid (a rising) 5.0% yield whilst the quality of earnings is improved.”

Jack said: “As expected, trading slowed in Q4, largely due to unhelpful weather in late August. However, LFL trading and expansion are in line and we are holding our forecasts, which include a 12% increase in earnings during 2015E, a year which offers a 5% dividend yield, by our estimates. Following recent weakness, we are upgrading our recommendation to Buy.

“Q4 was down 0.3% mostly due to poor weather in August. We forecast 2014E EBITDA margins to be up 60bps aided by cost mitigation, avoiding discounting on food (unlike some competitors) and the opening of higher-margin new builds. We believe the cost backdrop should be benign in 2015E.”

The company’s new build pipeline (of 25-30 sites pa, of which five pa could have a co-located lodge) extends out to 2017E and Jack said that such a pipeline is valuable against a backdrop of other operators bidding up for new sites. He forecasts 27 new builds opening in 2015E.

In Taverns, managed (130 pubs) and franchised (540 pubs) LFL sales were up 2.1% in 2014E, with food up 2%, drink up 1% and machines up double-digits (aided by January’s increase in maximum prizes to £100 from £70). In Q4, Jack believes LFL sales fell 1.3%, with food up 1% and drink down 2% due to poor weather.

Leased LFL profits were up 3% in H1, Q3 and Q4 2014E, aided by growing rents and wet margins. Brewing volumes were flat in 2014E.

Jack said: “We forecast full year brewing margins to have also been flat (H1: +10bps); we believe the slight fall in volumes in Q4 related to lower-margin standard ale in the off trade following the World Cup.

“We forecast Marston’s to have generated 10% underlying PBT growth in 2014E, after excluding 2013’s 53rd week (£3m) and the impact of disposals (£10m) and forecast 12% PBT growth in 2015E, driven by new build expansion and aided by strong cost mitigation. Our positive recommendation reflects this and the 5% dividend yield (2015E).”

French at Cenkos said: “Trading has been challenging in the last 11 weeks, mainly due to the weather in our view, with implied LFL sales negative in Destination & Premium (-0.6%) and Taverns (-1.3%). Leased LFL profit growth has been maintained at c3% whilst Own-brewed volume growth has slipped from 1% after 41 weeks to flat at the year-end.

“We expect consensus forecasts to edge back from £85.8m PBT to c£83-84m PBT. The group opened 27 new build pub restaurants and has reiterated guidance of at least 25 for FY 2015E. The stock trades on a FY 2015E P/E of 10.8x and yields 5.0%.”