Leading analyst Simon French has reiterated his Hold recommendation and 750p Target Price for Greene King ahead of its half-year results on 3 December, predicting a “robust” performance for the brewer and pub operator.
French, of Panmure Gordon, said: “We expect a robust performance and forecast £87.3m PBT.
“The group traded well during the first 18 weeks of H1 with 4.6% like-for-like sales growth in managed pubs. We think consensus forecasts for FY 2014E of £171.7m PBT are well under-pinned. However, given three-year forecast CAGR in EPS of 7.4%, the stock remains relatively expensive trading on a CY 2014E adjusted EV/EBITDAR of 10.1x and a yield of 3.4%.
He added: “Greene King issued a solid Q1 IMS reporting 4.6% like-for-like sales growth in Retail (managed pubs) for the 18 weeks to 1 September, compared to our forecast of c.5% and implying c.5.6% in the last 10 weeks. Within Retail food, like-for-like sales increased by 5.7%, drink 3.7% and accommodation 6.0%. The Retail estate has increased to 1,000 sites. Like-for-like EBITDA in Pub Partners (Leased & Tenanted pubs) is up 2.7% with average EBITDA per pub up 5.8% (5% after eight weeks) and volumes in the Brewing division up 1.5%. Within Brewing, core brand volume was up 2.7% (1.5% after eight weeks) led by Old Speckled Hen growth of 7.9%.
“We would expect the group to trade well in H2 given the timing of key Christmas trading days, and relatively easy comparatives due to bad weather in January and March (snow in four weeks out of 12). FY 2015E should benefit from the FIFA World Cup as well as the increase in machine jackpots to £100 from January.”
