Free share tips posted weekly! This week’s free tip is Marston’s. With the easing of lockdown restrictions now seeing more people venturing out to meet friends and family, we think that it is worth taking a look at Marston’s (MARS), the leading independent pub company. The share price of the company has drifted back of late, having been over 100p as recently as May, and now that it has bounced off its recent low of 78.25p we think there is scope for further progress in the short-term.
Marston’s is a leading independent pub group operating over 1.500 outlets in the UK under brands including Pitcher & Piano, Revere, Generous George and Milestone Rotisserie. As well as these brands, the group also operates inns and pubs across the UK, and these are a mix of managed, franchised and leased outlets. Although some pubs are wet only, many also serve food and some outlets also provide accommodation. All the group’s pubs are now open for business and over 90% have outside trading areas. In addition to the pub operations, the group also owns a 40% stake in the brewing joint venture with Carlsberg following the disposal of its brewing operations to the business last year.
Obviously, the group has endured a torrid time since the start of the pandemic and the group lost money in the year to 30 September 2020 and will lose even more in the current financial year. However, the trading update released at the end of July, covering the 42 weeks to 24 July, revealed significantly improved trading since 17 May when pubs were once again allowed to open indoors. The period has benefited from additional food covers, warmer weather, the investment in outdoor areas and the delayed Euro 2020. Accommodation sales have also benefited from restrictions on overseas travel and the increase in staycations.
The short-term outlook remains uncertain with many hospitality businesses struggling with staff shortages due to the ‘pingdemic’ and future Government policy being changeable at short notice. Nevertheless. If the country does begin to see more normal levels of activity there is clear potential at the company for a strong recovery. Debt levels at the company continue to fall as well which should provide some comfort. In the year to 30 September 2022, the company could make adjusted pre-tax profits of around £90m for earnings per share of 12.5p. This would put the shares on a prospective p/e ratio of 6.6x which looks too low. Our free share tip is BUY.
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