Marston's Share Discussion Threads

[chinese investor] 04/9/2017 16:06

"Irish drinks firm C&C has inked a deal to acquire pub chain Admiral Taverns alongside Proprium Capital Partners in a £220 million deal"

[jeffian] 04/9/2017 15:54

....speaking of which -

[zcaprd7] 04/9/2017 15:44

Unusual it's in the doldrums, considering the the M&A activity in the sector...

[spacecake] 04/9/2017 15:40

Jeffian, Thanks for your thoughts on the NAV, seemed to be valued as if there's poor future prospects. Just have to sit the slump out.

[jeffian] 02/9/2017 17:09

I never look at broker/website stats because I don't know what 'adjustments' they choose to make. I always go to the horse's mouth - the published accounts.

I don't know where Morningstar's NAV comes from. Looking at the Balance Sheet in the Interims, they had Net Assets of £793m / 581 shares in issue = £1.36/share. Even if you knock out the Goodwill of £227m, it's still 97p/share. After the Charles Wells acquisition, they've added an asset of £55m (the acquisition cost) and issued 57m new shares, so NAV of £848m/638m shares in issue = 1.33p/share.

[spacecake] 02/9/2017 09:50

jeffian, I would think big swings in the share price, small swings in the NAV ?

I see on a Morningstar sheet that 2016 actual NAV per share for the company is 73.19p
2017 estimate 146.01p, 2018 est 146.16.

Thats a hefty step up (double) in broker estimates.

[jeffian] 01/9/2017 20:56

If you mean "Is there a store of unrecognised value in the MARS estate?" the answer is almost certainly "no". There was a time (60's? 70's?) when pub/breweries were stuffed with undervalued property assets which simply sat on their balance sheet at cost (even if they had been acquired decades earlier) but the asset strippers quickly cottoned onto that and also since pubco's geared up they have valued their estates pretty fully. They are now obliged by accounting rules to revalue annually anyway.

I went through a time when it was pretty easy to convert pubs to residential use/development but there are now fairly strict planning controls on that and also restrictions such as pubs being classed as "an asset of community value" which prevents easy change of use.

Finally, most of MARS estate is not in the South East/London anyway. They are historically a Midlands/North company and that's where the bulk of their estate remains.

[cathian] 01/9/2017 17:51

Can any of you clever people tell me what the real NAV of Marstons is? Can pub property be used for residential purposes? If so, in London I imagine it could be quite valuable.

[lendmeafiver] 01/9/2017 09:03

Quote in an iii linked article from Jonathan Brown lead manager of Invesco Perpetual UK Smaller Companies Investment Trust "Wetherspoon has a good estate and is a well-run business. If we do get a recession, it will still trade well." Marston's, whose share price has been noticeably weak recently, made the right decision to sell off old pubs and invest in new ones, he adds. The firm also has the advantage of brewing its own products, and it is benefiting from a revival in demand for craft beer and real ale.

[philanderer] 01/9/2017 07:52

1st sept HSBC hold tp 115p

reiterates

[chinese investor] 31/8/2017 15:14

Signs Of Life ?

[spacecake] 28/8/2017 12:32

“Beer tax has now risen by 43 per cent the past ten years. This latest rise will mean 4,000 fewer jobs this year, mostly in pubs. Tax rises on all alcohol will add £125 million to the cost base of pubs.

“Britain’s beer taxes are three times the EU average, and an astonishing thirteen times higher than those of the largest producer, Germany. If we are to compete in the future and as we move towards the challenges of Brexit, action must be taken on tax, to ease the burden on a beer and pub industry that supports around 900,000 UK jobs.”

[rcturner2] 28/8/2017 07:42

Thanks Jeffian, much appreciated.

[jeffian] 27/8/2017 23:59

I should preface this answer by saying that for many years I worked for, and had a financial interest in, a regional brewer which was absorbed into the EI Group (formerly Enterprise Inns) and at that time I was totally sold on the Ted Tuppen mantra that the tenanted model worked. You had 2 secure income streams - rent and wholesale profit (plus a few add-ons such as gaming machine income etc) - and the tenant took all the retail risk, thus income tended to stay stable whatever was happening "at the sharp end". The two big game-changers were the 2008 financial crisis which severely rocked the boat of heavily-geared companies and the attack on the "tie" which caught the industry completely on the hop as it had been tested several times, had EU clearance and had the nod of the UK Govt that it would not be unwound. A clever campaign led by Greg Mulholland at a time when the Govt's eye was off the ball changed all that.

Having said that, I am still a fan of the "vertically integrated" model - that is, where the company brews its own beers and distributes them either through the wholesale trade or through its own pub estate of both managed and tenanted pubs. It seems to me to offer the same benefits as an Investment Trust by spreading the risk across a range of different businesses which will prosper or struggle at different stages of the business cycle resulting in fairly secure earnings. In my opinion, GNK remains the best example of that. MARS trails along in its wake but it's taken a few mis-steps along the way and I think the recent focus on brands/brewing is another one of them.

[exel] 27/8/2017 20:32

I must allow jeffian to answer that very fair question before venturing a view!

[rcturner2] 27/8/2017 20:17

jeffian, and of the two models, which do you think is "better"?

[ianood] 27/8/2017 19:59

Thank you exel, I just thought it worthy of reiteration especially after the recent pull back in the share price. I share your sentiments and trust that value will out :)

[jeffian] 27/8/2017 19:59

andyj,

"I don't understand is why Mars sits at a 5 year low, whilst JDW sits at a 5 year high given the similarities".

The only similarity is that they both operate Managed Houses, but in the case of JDW that's all they do, whilst MARS also brews, wholesales, distributes and operates a tenanted estate, which are quite different activities. A pure Managed House operator is simply a retailer in another guise; they own or lease their 'shops' (pubs), pay all the overheads, employ the staff and buy goods wholesale which they then sell retail to their customers and pocket the profit. MARS, as a brewer/wholesaler, may even supply them but, if they do, they would only get the production or wholesale profit. MARS do have a substantial Managed House estate but also a big tenanted estate, from which they receive rent and wholesale profit from the sale of goods to their tenants (who in that case are the retailer and they take the retail profit).

It's a common mistake to assume that any company owning or operating pubs is the "same" business, but under the skin it's chalk and cheese.

[exel] 27/8/2017 18:33

Thanks ianood, good and very level perspective from you, yet again. I sense that people are generally underestimating the MARS team, their strategy and their implementation of the same. Of course, I may be dramatically mistaken? It has happened a few times in past cases.

[ianood] 27/8/2017 17:36

Yep, 18th May with placing done at circa 136.9p and with an agreement that will see Marston’s become the exclusive distributor for drinks to roughly 1,355 Punch Taverns pubs, the part of the latter company’s estate which is not being sold to Heineken. Heineken is buying approximately 1,900 pubs from Punch.

Chief executive Ralph Findlay said the deal was signed this month and would take effect from September.

Crucially, Marston’s will earn money from the deal even if all the Punch pubs decide to stock drinks made by other companies, although publicans will have the option to choose to sell one of the tipples made by the Wolverhampton-based business.

The deal comes after Hobgoblin and Brakspear brewer Marston's said it had bought rival Charles Well Brewing for £55m - money it raised by issuing 57.6m new shares.

[diku] 27/8/2017 17:30

Working in pubs is similar to working at Mac Donalds...staff will be there for 3-6 months to a year and then move on...or partime staff just supplementing their full time income...it is regarded as casual work...

95p anybody?...

[exel] 27/8/2017 15:29

Am guessing this stock was subject to at least some updated diligence before the CW related equity placing of £50m+? Also, if there were something especially bad/recent lurking, then they would be obliged to update the market, now or soon?

[andyj] 27/8/2017 02:10

I have been tempted by MARS for over a year, due mainly to the income. I am somewhat cautious about shares that trickle endlessly down after good news, in light of DC, CLLN and PFG who all did that before revealing the mess inside. Anyway, what I don't understand is why Mars sits at a 5 year low, whilst JDW sits at a 5 year high given the similarities, can anyone explain that? Or is it just the market is fixated with a buy JDW, sell MARS trade that in both cases has gone too far?

[lurker] 25/8/2017 17:21

ecel...did you buy lots?