Analysts have given upbeat assessments of Marston’s, the brewer and pub operator, after it reported a 1.6% rise in like-for-like sales in the 10 weeks since 12 May.
Simon French at Panmure Gordon said he believed consensus forecasts for Marstons are “too cautious”.
He said the +2.2% sales growth in its managed arm for the 22 weeks to 21 July compares to his estimate of +2%, implying +1.6% in the past 10 weeks.
“With a robust performance in tenanted and franchised pubs where operating profit is +3.2% and Brewing where own-brewed volumes are +2% we expect no change to consensus estimates of £87.5m PBT (12.4p EPS). The stock trades on an adj EV/EBITDAR of 8.1x and yields 5.8%. We reiterate our Buy recommendation and 130p Target Price, implying c20% upside potential.
“The group remains on track to complete 25 new-build pub restaurants this year and continues to guide towards 20-25 per annum going forward. The franchise estate now consists of 450 pubs and continues to perform strongly. FY 2013E will be a 53 week year and we anticipate consensus forecasts may move up c£2m to reflect this.
“For FY 2012E we forecast £89.3m PBT (12.5p EPS), compared to current consensus estimates of £87.5m PBT (12.4p EPS). In FY 2013E we forecast £99.3m PBT (13.5p EPS) ahead of consensus forecasts of £94.5m PBT (13.0p EPS). Before adjusting for the 53rd week we think consensus forecasts are too cautious for FY 2013E not reflecting the benefit of 60 new managed pubs opened in the prior three years.
“The shares trade on an attractive valuation of a CY 2012E adjusted EV/EBITDAR of 8.1x and yield 5.8%.”
Paul Hickman at Peel Hunt also issued a Buy recommendation and highlighted Marstons’ “encouraging progress”.
“Stronger than expected managed trading in the last difficult quarter heads a robust result that gives an encouraging account of Marston’s hold on its value market. Our Year-2 upgrade for 53 weeks puts FY2013E earnings growth into double-digits and underpins our forecast dividend growth with increased cover.”
Sam Fuller at Altium said: “Against a backdrop of miserable weather in Q2, 2.2% like-for-like growth by Marstons in its managed pubs represents a decent performance, particularly when put into context of a 5.3% drop in beer sales reported in the same period by the British Beer and Pub Association.
“Marston’s performance was undoubtedly boosted by strong trading over during the Queen’s Jubilee celebrations and Euro 2012. It will be interesting to see if the Olympics, coupled with Summer finally arriving, can have a similarly positive impact on the pub trade.”
