JD Wetherspoon’s £93.7m share placement should provide a buffer against the impact of low sales upon reopening, as well as enable it to invest in new sites, as and when opportunities arise. We round-up the thoughts of analysts from Liberum, Peel Hunt and Hargreaves Lansdown on the pub operator’s latest move.

Liberum has updated its forecasts to reflect the current lockdown and the placing. “We now expect EBITDA of £13m (-90%) in FY21E and £204m (-2%) FY22E. We move our target price to 1150p (from 970p) given improved visibility,” it said. “Guidance remains withdrawn but management scenario analysis provides a plausible outlook for recovery in the years ahead.”

Its note added that the equity place, along with other sector fund raises, “will shine a light on the growth opportunities for the survivors, ensuring the business emerges from the pandemic with funding for needed investment in the current estate and to benefit from acquisition opportunities in the market”.

Meanwhile Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown noted that it’s the second time the company has gone “cap in hand” to shareholders to raise funds during the pandemic.

“This time round it’s not just a case of battening down the hatches and waiting for the storm to subside, the company aims to use some of this cash injection, to snap up prime locations from rivals in distress,” said Streeter. “It’s confident that pent up demand for socialising in pubs and restaurants will see a huge upswing in trade once its venues reopen, as hoped, at the end of March.”

Maintaining high numbers of customers is key for the company given that many of its venues are large and to keep costs low, it needs to sell high volumes, she said, adding that its young customer base have been less fearful of venturing out which bodes well when restrictions do ease.

“While queues may form round the blocks for its high street pubs once the latest lockdown finally ends, its airport business is likely to continue to stay depressed with global travel not expected to fully rebound until 2023,” added Streeter. “JD Wetherspoon may be building a war chest for expansion, but some of that money will inevitably leak away to plug holes elsewhere while the business recovers.”

Peel Hunt’s note following the announcement, titled ‘A clear roadmap to recovery’ stated the analyst believed the equity placing was justified for several reasons. “JDW has £94m of outstanding deferred costs, and any additional capital should facilitate the acquisition of new properties at favourable prices. JDW is currently considering the acquisition of properties in central London and further freehold reversions,” read the note, adding that either an extension to the VAT cut or a more progressive pricing policy could be game changers when the pubs reopen.