Marston's Share Discussion Threads

[analyst] 17/7/2009 18:36

21st of July

[gyau] 17/7/2009 18:00

when will the npaids stop trading - think we will have a bounce then

[whackford] 17/7/2009 08:25

Jeffian - your lengthy comment above reflects the way I see it too. I have coughed up a tidy sum for the rights in full, although was annoyed at having (because of high dilution otherwise) to do so after so may other rights issues.

Marston's have a very good track record, especially as regards dividend payments. Hopefully, if the economy returns to anything like normal, in 5 years' time this will look like a steal.

[timbo003] 16/7/2009 08:45

This one is bucking the trend this morning, all the other pub companies on my monitor are down (despite a good trading updates from MAB and a okayish update from ETI), I have no idea why, other than MARS look incredibly good value right now.

[timbo003] 15/7/2009 09:25

Just had another look at the offer document and this passage (in blue) caught my eye:

Rothschild, RBS Hoare Govett, J.P. Morgan Cazenove and J.P. Morgan Securities may, in accordance with applicable legal and regulatory provisions and subject to the Underwriting Agreement engage in transactions in relation to the Nil Paid Rights, the Fully Paid Rights, the Existing Shares, the New Shares and/or related instruments for their own account for the purpose of hedging their underwriting exposure (if any) or otherwise. Except as required by applicable law or regulation, Rothschild, RBS Hoare Govett, J.P. Morgan Cazenove and J.P. Morgan Securities do not propose to make any public disclosure in relation to such transactions.

So the underwriters (Rothschild, RBS Hoare Govett, J.P. Morgan Cazenove and J.P. Morgan) don't have to declare short positions, I suspect most/all of them have gone short of the ORDs, expecting to buy back in and close there positions with the cheap shares they will pick up through the underwritng

arab3: the rights issue price is 59p, the nil paid rights are currently 24.5p to buy

[taurusthebear] 15/7/2009 08:49

Another CR punt goes AWOL! :0)

[arab3] 15/7/2009 08:11

what price is the rights issue ?

[timbo003] 15/7/2009 07:09

From today's Independent:



Further afield, Marston's, the pubs group that lagged behind in the session before, recovered to 83.25p, up 4.4 per cent or 3.5p thanks to Goldman Sachs, which moved the stock to "neutral" from "sell", citing valuation. "Marston's is now valued in line with the sector, we therefore see the risk/reward as more evenly balanced," the broker said. "The rebased dividend looks far more sustainable at the revised level we forecast and the balance sheet leverage more manageable (despite plans to invest much of the proceeds)."

Also see Wetherspoon's (rather good) results just out, I think MARS are going to have an "up" day.

[jazza] 14/7/2009 07:37

A second short position disclosed....seems "short the rights issue" is seen as a lucrative game (a la banks).

Have there been attempts to talk down MARS of late (e.g. in the media) to help these guys' short positions perform?

[pherrom] 13/7/2009 20:21

I think that Marstons have actually fixed a substantial portion of thier borrowing costs

Part of the rights issue is also to buy in fixed debt at a discount.

I will be taking up the rights, although I rather wish that they hadn't gone ahead with it. But something about speculation - accumulation?. The bottled Pedigree is a good beer - which helps.

[marvelman] 13/7/2009 19:21

No Jeff, stick to what you are good at.

[jeffian] 13/7/2009 18:11

I agree with timbo and have voiced similar ideas on another thread. Never mind Marstons, the UK Government is in a huge pickle running up huge borrowings which it has little idea how it will repay. What is "Quantitive Easing" (i.e. printing money) all about if not to inject inflation back into the economy? Being in my 50's and remembering the period marvelman describes, the difference then was the penal rates of interest (up to 17/18% with margin added) which forced people to sell assets because they simply couldn't afford to hold them. This time round, not only have we not (yet) seen the same levels of unemployment, but interest rates are negligible meaning that people will hold and let rather than selling at huge reductions. Of course interest rates may and probably will go up, but not for a while and not to that extent. UK Govt simply can't afford it! In the meantime, the effects of inflation are that real asset values go up and cash values go down so timbo is quite right to point out that real assets acquired on loans can be repaid in toytown money down the line.

As for Marstons, to use Ted Tuppen of ETI's analogy, if you only had a 54% mortgage on your house you'd be considered very conservative. If your net income was double your finance costs you wouldn't be too worried about servicing debt.

I think what has hacked off the market is that MARS didn't have to have this Rights Issue at all. They are not using it to reduce debt anyway, but to develop new pubs. More than doubling the issued share capital (11:10) at a (then!) deeply discounted price of 59p to raise a measly £176m is potentially hugely dilutive and effectively forces holders to take up their Rights. I think the big holders are just punishing them. Having said that, I think it's an opportunity, will be taking up my Rights, and I expect the share price to recover when the fuss dies down.

Regards, Ian

[marvelman] 13/7/2009 17:50

Timbo

Inflation did not pay off the debt..how could it? but the gap between mortgage and asset value made them richer than they deserved.(Me included). This though is a different scenario because Marstons "mortgage" of over $1 billion has to be serviced by income which is reducing as the economy does and interest rates rising (as they are likely to) will increase their repayments and therefore the free cash to pay it down. Some of the over 50's people you describe are likely to have done a Marstons, many have, by buying bigger properties with bigger mortgages and now find themselves due to the employment situation (many of them) with reduced or no income to service them..and have gone or will go bust. Only the people wise enough (or timid enough)not to have borrowed more (unlike Marstons) are in the position you describe.Regards.

[timbo003] 13/7/2009 17:21

Marvelman

Surely that is how most people (50+) have ended up owning their own houses (either outright or with tiny mortgages), they never really paid the money off, they just went highly geared (1000% +) and then inflation did the work for them. I see it as the same way for asset rich, cash generative companies with high gearing such as Marstons (assuming [as I do] we are in for a dose of inflation)

[marvelman] 13/7/2009 16:33

Timbo..that's a new approach to debt!!...let it inflate away.

Should inflation take a turn upwards then interest rates will surely follow. I doubt that the loan interest is fixed. I am always surprised about how many companies, this one included, finance their dividend payments by borrowing the money to do it. Regards.

[timbo003] 13/7/2009 16:22

My view on companies with high gearing (that are cashflow positive and asset rich) such as Marstons: with the goverment/BoE printing money, inflation is likely to be around the corner, in which case companies such as Marstons are likely to do well, the debt will just inflate away.

[marvelman] 13/7/2009 16:04

Countryboy

The fact that the borrowings may be mortgaged against assets is great for our banking friends who no doubt have their debt secured against them. It seems this company has borrowed against its assets in order to expand and is paying the price in this very depressed economy. Such high gearing is unacceptable in today's economy and I would be concerned that if the downturn does not come out of its nosedive companies like this will be paying the price. I cannot see a bidder taking on this much debt either. Many thanks for your response. I wont be investing here though.Regards.

[oniabsta] 13/7/2009 16:02

Cheers for that Timbo.

[timbo003] 13/7/2009 15:58

All I can find (from recent news) is this from last Friday

[countryboy] 13/7/2009 15:44

Looking at the interim report, net debt is considerably more than covered by tangible assets.
However, gearing is definitely higher than would be desirable, presumably reason for rights issue. Sell off may reflect dissatisfaction by institutional shareholders who reportedly feel they were misled about the companies intentions at the time of the last report (allegedly!). No doubt there will be those who take a contrary view, especially if we get a warm summer. JDW apparently reporting improving trend.
DYOR

[marvelman] 13/7/2009 15:14

This from the last interims "Net debt as at 4 April 2009 was GBP1,296.9 million (2008: GBP1,269.7 million)"

Looking at this one as it does look cheap but can that be true with a market cap of circa £250 million? Can anyone comment who knows the background better. I understand there has been a rights issue recently but that doesn't seem to go anywhere to cover the debt position.

[timbo003] 13/7/2009 14:59

I don't know the answer to that one oniabsta, but I do know that I have just bought my maiden stake in these, 12K shares at 78.5p/share

[oniabsta] 13/7/2009 14:37

Does anyone know why the massive drop today?