Marston’s has been described as a ‘top value play’ by analyst Peel Hunt, in a note preceding the brewer and pub operator’s third quarter trading statement due out on 28 July.

Previewing figures from the update, the analyst said that Marston’s like-for-like sales were down 23% between 12 April and mid-May, in the outdoor-only trading period, with the business achieving break-even group EBITDA, with 80% of the estate trading.

The analysis from Peel Hunt noted that since the start of the pandemic, Marston’s has merged its brewing operations with Carlsberg, generating a cash windfall equivalent to c50% of the current market capitalisation, with no adverse impact on long-term cash flow.

It has also acquired Brains, boosting its EBITDA by 5%. “Despite all this progress, the shares are down almost 40% over the same period and now offer a 11% equity FCF (free cash flow) yield on 2023E forecasts,” it added.

Peel Hunt’s forecasts assumed like-for-likes are down 20% over the third quarter and down 10% in the fourth, compared to equivalent period in 2019.

Alongside protecting and supporting staff and the community, it believes priorities for 2021E need to be site investments (particularly in external trading), operational improvements, through efficiencies from apps and improved menus, and debt reduction, which should all provide a platform for future equity value creation, in its view.

“Marston’s historic average EV/EBITDA (IAS 17) is 9.7x. On 2023E forecasts, this would equate to a share price of 132p. In our view, the share prices should be underpinned by the valuation, the strength of freehold valuations, the current favourable conditions for trading and debt reduction, and the amount of PE cash that is waiting to be invested in the sector,” added the note.