Leading analyst Douglas Jack at Numis has reiterated his Buy recommendation for Marston’s following its H1 results this morning, saying that the company has “strong underlying trends” and that it’s “well placed to drive growth”.
Jack, of Numis, issued a Buy recommendation at a Target Price of 185p. He said: “H1 PBT is up 9% to £29.0m, held back by disposals, prior to which we estimate PBT would be up 18%.
“With disposal activity now reverting to high-multiple single-site transactions and new build expansion accelerating, Marston’s should generate double-digit growth in 2015E and 2016E. Over this period, returns should continue to rise, leverage should fall and managed/franchised profits should rise to 85% of pub profits.
“We are holding our forecasts. Trading has remained ahead during the first five weeks of H2 with P&D LFL sales up 4.1% (+5.4% YTD) vs. our 2.5% full year assumption. In early H2, Taverns LFL sales rose 3.0% (3.7% YTD), leased LFL profits rose 5.0% (vs. our flat H2 assumption) and brewing volumes rose 6% (vs. our +1% full year assumption).
“Marston’s is well placed to drive growth, with a strong new build pipeline extending out to 2017E, in addition to which there are 15 existing sites ready for bolt-on lodges. With the regional trading backdrop strengthening and only 1% price increases needed to mitigate cost inflation in 2015E, we believe upgrade risk to earnings and dividends is rising.”
