Leading analyst Simon French has reiterated his Hold recommendation and 150p Target Price for Marston’s after a “slightly better than expected” trading update.
French, of Panmure Gordon, said: “Marston’s has announced a slightly better than expected trading update for the 15 weeks to 18 January reporting 4.1% LFL sales growth in Destination and Premium pubs, implying c5% in the last eight weeks compared to our forecast of c4% and the previous seven weeks of 3.1%.
“Trading in Taverns has shown good progress with LFL sales growth accelerating from 2.1% after seven weeks to 3.0% after 15 weeks, implying c3.8% growth in the last eight weeks. Leased profits are estimated to be up c1% after 15 weeks, compared to flat after seven weeks. Brewing volumes are down YOY but profits are ahead reflecting the erosion of low-margin business and good growth in premium ales.
“The group is on track to open 25-30 new pub restaurants in FY 2014E with 11 due to open in H1. Profitability, cash flow and net debt are in line with expectations and the group will announce its H1 results on 15 May.”
He added: “At this early stage in the year we do not expect any change to FY 2014E consensus forecasts of £87.2m PBT (12.1p EPS). Our forecast is modestly below this at £85.8m PBT (11.7p EPS). Earnings are forecast to grow substantially in FY 2015E reflecting the accelerated new build managed pub opening programme.
“The stock trades on a CY 2014E adjusted EV/EBITDAR of 9.0x and yields 4.5%. Whilst this is inexpensive it reflects flat earnings over the short-term as the business is reoriented towards higher growth segments of the market. We reiterate our Hold recommendation and 150p Target Price.”
