Leading sector analyst Simon French has reiterated his Buy recommendation and 806p Target Price for JD Wetherspoon ahead of its full-year results on 13 September and predicted a “solid” update on current trading.
French, of Panmure Gordon, said: “We anticipate a solid current trading update accompanying the FY results with c2% LFL sales growth despite a tough comparative of 8.4%. For FY 2014E consensus forecasts are for £80.7m PBT (49.7p EPS).
“This leaves the stock trading on a CY 2014E adjusted EV/EBITDAR of 8.0x compared to a weighted sub-sector average of 9.8x despite best in class forecast earnings growth. We therefore reiterate our Buy recommendation and 806p Target Price implying c11% potential upside.”
He added: “The group indicated that a margin of 8.6% is achievable going forward if reasonable sales growth is achieved despite the group incurring further tax and regulation increases of c£8m. It upgraded its openings target from 20-25 per annum to c30. In FY 2014E Wetherspoons will require c3% LFL sales growth to offset cost inflation so nearterm earnings growth is predicated on new site openings.
“Openings in FY 2014E are anticipated to be more evenly weighted over the course of the year compared to more back-end weighted opening programmes of recent years. We anticipate a solid current trading update accompanying the FY results with c2% LFL sales growth despite a tough comparative of 8.4%.”
