Leading analyst Karl Burns has increased his Target Price for Fuller’s ahead of its year-end this month.
Burns, of Panmure Gordon, reiterated his Hold recommendation for the London-based brewer and pub operator. “As Fuller’s approaches its year-end (March) we roll our DCF valuation on 12 months, which implies a fair value of 978p, our new target price (previously 900p),” he said.
“Recent warm weather trends have been the opposite of last year’s cold and snowy March so we think the risk to FY 2014E consensus forecasts of £33.0m PBT is on the upside, despite the group’s up weighted investment in H2.
“The stock trades on a CY 2014E adjusted EV/EBITDAR of 11.3x – a small premium to Young’s on 11.0x and the wider pub and restaurant sector average of 10.6x. However, with strong property price growth in London and the South East we think the shares are well underpinned.
He said: “Fuller’s released a robust IMS reporting 7.7% LFL sales growth in its managed pubs for the 43 weeks to 25 January. This implied 7.2% in the last 10 weeks and compared to our forecast of c6%. In tenanted pubs LFL profit was up 2% YOY and brewing volumes had increased 1% for the 43 weeks. Net debt was £138m, or 2.6x EBITDA at the period end.
“We expect the group to trade well in FY 2015E benefitting from new pub acquisitions, such as The Distillers in Hammersmith, and the opening of its new pubs at London Heathrow’s Terminal 2. The current estate should benefit from the additional refurbishment projects the group committed to after Christmas. A later, hopefully drier, Easter should benefit trading as should the football World Cup in June and July.”