Marston's Share Discussion Threads

[quady] 04/7/2018 23:07

QP - I have checked and Marstons peaked at about 330p in Feb 2007 on a rebated basic given the share split and rights issue, but that's not so material to your point.

In short, I don't know why the slump, I wasn't invested then. But I can give some clues which others may pick up on to save me going into the accounts.

By Nov 2008 the share price was at 60p.

Between those two dates Marstons put in place their long term debt financing.

Turnover is now about 40% higher than it was at peak share price, but profit flat between now and then. The dividend at the share price peak was about 2.7%, but payments in pence per share terms a bit higher than today.

From the looks of it, it was misspriced in 2007. I think it's misspriced today, which is why I hold it.

Beer might be in decline as a category, doesn't mean there isn't profit to be had. I also invest in BrewDog who's share valuation tragectory looks more like Amazon than Marstons. I doubt that in my lifetime beer will stop being sold, people stop going to restaunts and hotels. What I do doubt are FANG valuations being realistic. Anyway, Marstons is more of a bet on real estate and finance as it is beer.

I'd be interested in others on here wisedom on why the share price fell so hard and hasn't bounced back.

[careful] 04/7/2018 22:44

Actions speak louder than words.
We must put our money where our mouth is.

I have a significant position in MARS.
Valuation is good, upside potential.
I could dump the lot tomorrow morning and switch to Amazon within minutes at little cost.

But I happen to think that Amazon are grossly overvalued.
With a CEO who wants to colonise Mars....no thanks.
A huge company that has stretched itself too far.
No doubt it capitalises the billions it spends.
Prudent accounting may with to write billions of it off.
Which means they are probably making losses.

We know they do well in cloud computing, another growing bubble that is getting very crowded.
We all wish that we bought in earlier but that is history.
I will think again about Amazon when Buffett buys in.
..but him and Charlie will not touch it with a bargepole.

[quepassa] 04/7/2018 21:20

not trying to convince you to do anything , dear boy. it is indifferent to me what you are invested in.


I know that your comfort zone is in the old world industries (coal, beer)which are in run-down mode and long may you prosper. I know you bizzarely don't seem to care if your capital diminishes significantly providing you receive a dividend. Nor does it surprise to see ruffian here who picks every dog with unnerving accuracy.


In terms of the next decade, I think we can safely say that pubs and independent breweries will continue on the downtrend whilst Amazon will continue to conquer the world.

By the way, using old school metrics to value new world tech companies just doesn't work. You really need to brush up on that.

ALL IMO. DYOR.
QP

[illiswilgig] 04/7/2018 20:23

Hello QP,

you make some very valid points.

I've not checked that far back - but I assume you are correct and MARS share price in 2007 was 470p! Sad for anyone who has held since then.

So to answer your question I expect that MARS is making a lot less profit today than it was 10 years ago. Hence the shareprice is a lot lower.

It is also possible, indeed probable, that MARS is rated much lower today than a decade ago, perhaps in the expectation that profits will continue to fall. Probably a bit of both, less profit and lower rating = 100p shareprice today.

The question is not what happened in the last decade - it's what will happen in the next decade. At least that is the basis upon which I invest.

You are certainly correct about the macrotrends of online versus highstreet retailing and about the rate of closures of pubs. Though the next decade leading to all pubs being closed is about as likely as MARS shareprice falling by another 370p?

But everything has a value - even if its a very low one?

So after Amazon's meteoric shareprice rise and Marston's shareprice plummet which shareprice is closer the companies intrinsic value?

It's interesting to note that Amazons profitability is actually quite low. It makes a 3% margin, 51bn sales and 1.6bn profit (Q1 2018) whereas Marston's has a 10% margin, 1080M sales 107M profit.

Expectations of future profitability at Amazon are incredibly high the shareprice is 250 times current earnings - whereas Marstons is only 7.

So Marstons is certainly valued very low - is it low enough?

You are right about the rate of pub closures. But I think its very healthy, if only the restaurant sector had been shutting as many restaurants they might not be going bust quite so often!

Over the last 6 years or so 60800 pubs in the UK have reduced by 10000, about an 18% decline?

If Marstons is an average estate I'd expect to see a similar rate of decline of a few percent annually?

So I've had a look and the answer is not simple. It appears that Marstons had an estate of around 2000 pubs a few years ago and now its 1568. But they sold 388 pubs for £144million and another 'portfolio' of 202 pubs. So as well as selling pubs they've also been opening pubs to end up with 1568 today.

Of course selling pubs is about as good as closing them down if you don't get much cash for them. But I notice in the results to October 2014 they actually booked a surplus against the disposals of £37.5m ie they disposed of the pubs for more than their asset value on the books.

That's a really key point. As well as a lowly rating on its profits and a reasonable margin it appears that Marstons pubs might actually be worth more disposed of than they are held on the balance sheet.

So although pubs are shutting down - it appears that it might be because the pubs are worth more closed and sold on than operating as pubs?

Not that I am promoting Marstons should sell off all its pubs and return the profits to shareholders, although others might do - but if they did so in an orderly fashion the likelihood is that I'd get back more than my shares are currently worth.

(IMHO) The net asset value of the estate and the dividend cover make it likely that Martsons shareprice will not fall significantly in the future, so its a low risk investment for me - with a 7% return and the possibility of capital appreciation.

I will leave my take on the new build pubs, lodges the 4000 room target and the breweries for another day. I think I will be reaching for the buy button again tomorrow,

If you were hoping to convince me not to buy MARS then I am afraid you've been counterproductive QP - but thanks all the same,

Cheers indeed,

Illis

[jeffian] 04/7/2018 20:17

#601,

The 1989 Beer Orders were a political attack on the perceived might of 'The Beerage' (albeit what the report called a "complex monopoly" was actually 6 major brewers fighting it out with no one dominant in any area, so how that represents a "monopoly" remains a mystery) and resulted in the breakup of the big pub estates owned and operated by the likes of Whitbread, Bass etc. That gave the opportunity for the creation of the big pubco's (Enterprise, Punch) but also for smallish 'regional' brewers to grow. I was involved in all that, but we got swallowed up (by Enterprise) in the feeding frenzy that followed. The 2 regionals which came out on top were GNK and MARS which expanded from their East Anglian and West Midlands bases to become truly 'national' in spread. So to that extent, MARS proved themselves one of the more 'dynamic' operators. Despite the Punch/Heineken deal, the idea that MARS should offer themselves to "a larger chain" seems most unlikely. It would almost certainly raise all sorts of competition issues and we would seem to have come full circle! Like others here, I don't buy the doom and gloom about consumer spending and the demise of the pub - I've been through every recession since the 1960's and the "death of the pub" has been a common theme to all of them - has never happened. There has been change, sure, but pubs evolve to suit the times and remain at the cheaper end of 'a night out' so will be the last to be cut from consumer spending on entertainment. I think MARS' problems are not structural but just a rather laid back attitude to milking those assets for profit. I like beer, but brewing is low growth, low margin stuff and their focus on spending more capital on more breweries/brands is a mistake IMHO. They need to focus on the pubs - managed and tenanted - and drive the returns from those by growing revenues and cutting costs.

[semper vigilans] 04/7/2018 19:33

Not if they still allow women to drive old-fashioned cars in their car parks.

[rcturner2] 04/7/2018 19:20

I also believe perhaps a bit bizarrely that self driving cars will be good for pubs.

[quepassa] 04/7/2018 18:48

good posts. fair points.


I posted this earlier this afternoon.

In the absence of a reply so far from ianian, would anyone else care to respond:


Could you please explain to us all why more than ten years ago in 2007 Marston's was priced at 450p++ per share and ten years on, despite a great run on the FTSE since the Financial crisis, Marstons is priced at 100p?



By way of comparison, in 2007, Amazon was at $50. Today it is priced at $1,700. An increase of 3,400%.



£10,000 invested in Marstons in 2007 is now worth £2,250.


£10,000 invested in Amazon in 2007 is now worth £340,000.



What is that telling you about the impact of the internet on trends, sectors, markets, new technologies, media, social interaction, online entertainment and modern consumer trends.


And when you look at the TV coverage of football fans rightly going crazy over England's great win yesterday, you'll sadly see that they are not in lovely quaint old pubs but "VENUES" with massive sports screens and guzzling euro-fizz lager, not Marstons.


That's why, like the High Street retail sector, the pub sector is dying on its feet with more and more pubs being torn down and converted into overpriced flats.

Sadly, the heyday of the pub passed decades ago and beer drinking ( that's proper English ale, I mean - not Euro-fizz) is sadly in a sorry state of continuing decline.


ALL IMO. DYOR.
QP

[careful] 04/7/2018 18:20

About 17% of all retail in online.
This is up from 11% in 2010.
It is flattening out, there are many disadvantages in shopping online.
returning unwanted goods is one of them.
Sometimes it is important to consider the numbers.
The vast majority of business is not online and many companies are both online and operate premises.

Amazon make almost zero profit on their whole business and lose money on retail.
How long before people lose patience with them?

People are social animals and getting out of the confines of you own house will always important. Study the numbers, so much hype.

[dinvester] 04/7/2018 17:46

QuePassa You are correct of course about the increasing trend to buy online.

One would hope that huge amounts of Martsons ales are provided to home shoppers by the supermarkets online shopping.

You do make its sound that Marstons problems are caused 'almost' solely by consumer trends, but that is only a small part of Marstons problems.

Marstons biggest problem, (for the share holders) is the CEO Ralph Findley. He should have done a deal waaaaay before now with another larger chain. Not to try and outgrow them by spend spend spend.

Findlay has his finger in so many pies, that he does not have the desire and drive to turn Marstons around, in comparison to a new CEO put in place by a larger acquiring company with full focus on Marstons.

The future for Marstons, if Findlay goes his merry way, I think 'could' be quite good indeed for many reasons.

I sit on my shares for now with the hope that said scenario happens.

[quepassa] 04/7/2018 16:14

I don't know what a CHUD is.

Sadly I do think more people are staying at home and CONSUMING VAST AND EVER INCREASING AMOUNTS OF MEDIA FED TO THEM BY EVER INCREASING BROADBAND WIDTH AND and YES CLICKING AWAY LIKE CRAZY TO HAVE HOME DELIVERIES OF EVERYTHING.

How many restaurant chains have failed this year? How many high street retailers have gone to the Wall this year? Who's doing well. Amazon, NETFLIX. streaming companies. Look at their growth figures and share prices. They are BALLISTIC. It's all changing and old traditions such as pub-going are on the way out.

In a funny sort of quaint and home-spun sort of amusing way, you profess to understand the sector. But I think you are sorely misguided.

I have a question for you about Marston's and about the market.



Could you please explain to us all why more than ten years ago in 2007 Marston's was priced at 450p++ per share and ten years on, despite a great run on the FTSE since the Financial crisis, Marstons is priced at 100p.




It's over for pubs. Beer sales are in exponential decline at the expense of other trendier alcoholic drinks and concoctions. Sorry guys, although we may all like old traditional pubs, their glory days are all but over. just like the horse and carriage, gas-lamp and telephone box.



ALL IMO. DYOR.
QP

[quepassa] 04/7/2018 14:43

cut throat terrible business whether margins squeezed to the floor by supermarkets' massive buying power or crippling taxes and laws which make pubs all but unviable.

[rcturner2] 04/7/2018 13:05

Marstons margin is about 7% I calculate.

[careful] 04/7/2018 13:05

fewer pubs means less competition for the survivors.
Same with retail, those that survive this tough period will do well.
Hang in there Marstons, you could be the right share at the right time.
There will always be a market for well run pubs, restaurants and accommodation.

You make money in this game by being contrarian, seeing the future before it happens.

[semper vigilans] 04/7/2018 13:01

High volumes, low margin?

[rcturner2] 04/7/2018 12:59

QP, all true, but you do realise that Marstons is a big supplier into supermarkets?

[quepassa] 04/7/2018 12:20

a record 23.6million viewers watched the World Cup last night and all crammed into pubs.....errr I don't think so.


yesterday's sector. totally ex-growth. little prospect of any real growth although heightened downside risk with more and more home consumption of much cheaper supermarket alcohol.

just a weak dividend-play with more downside risk than upside potential

[jeffian] 04/7/2018 12:18

#588,

Well in my case, I inherited some shares in 1972 but my old man omitted to tell me that I was due to pay CGT (he assumed they would go on up!). When the surprise (to me) CGT bill turned up in 1974, the tax was more than the shares were worth!

[123trev] 04/7/2018 12:12

I say the best of luck to you but many times I’ve stuck to cash and glad I did there are obvious sighns and we are clearly in the middle of a severe downward trend imo but that’s just what it is an opinion.

[chinese investor] 04/7/2018 12:10

1974 was "interesting" - an understatement !

[jeffian] 04/7/2018 12:06

Well the market would be an interesting (and volatile!) place if all investors followed a policy of 100% cash in (perceived) bad times and 100% invested in good. Just to prove that 'the market' is an amalgam of all views right across the spectrum, I (and My Old Mum before me even longer) have been pretty well 100% in equities since 1972 and, despite ups and downs (1974 was 'interesting'), it has done me no harm at all. If you think you can time the market, good luck to you. I do happen to have a slug of cash at the moment, purely because I have encashed an offshore bond for estate planning reasons, but generally I like my capital to be producing a steady and growing income stream from dividends rather than being dead money in the bank. And as for MARS being "the most risky share that I own", I consider it risk free (not in terms of the share price but the security of the asset).

There. Call me a Contrarian, why don't you?!