Marston's Share Discussion Threads

[arf dysg] 30/6/2017 11:37

A mortgage of £100k on a £200k house would be fine, just as long as you are steadily reducing the debt. The alternative would be very worrying.

[ianood] 29/6/2017 10:12

Remember that MARS debt is protected from rising interest rates via the large hedge of IRSs that are in place.

[jeffian] 29/6/2017 10:00

I'm rather the other way round; I prefer GNK to MARS as a better-run company deserving the premium, but I get round the problem by holding both!

As for debt, I know many investors are wary of any company with a large figure on the balance sheet but just because it's big doesn't mean it's a problem. The pubco's large debts are secured against even larger assets. As an individual, if you ran up a debt of £100k to support your lifestyle on the basis that you could afford the repayments, that might be a worry. If you have a mortgage of £100k on a £200k house, nobody thinks twice about it.

[illiswilgig] 29/6/2017 09:48

Yes, GNK results out today.

I don't find it easy to compare the two nowadays after the acquisition of Spirit by GNK which seems to be going well but makes GNK a much larger company, twice the turnover of MARS and dominated by its pubs.

My gut reaction is that both are making modest good progress - but as always its limited by the astonomical level of debt in both companies. With little sign of it being paid down in any serious way I only have a small holding in both GNK and MARS right now.

I am struck by the tone of the GNK statement which very much comes over as a Pubco with a premium inhouse brewer. Whereas Marston's recent statements read as a regional brewer with a premium pub estate, though in practice both companies brewing activities are a small proportion of their business. But perhaps it reveals the main difference in their strategies?

Quality of GNK earnings seems higher than MARS from the figures, GNK ROCE 9.4% whereas MARS don't reveal theirs but Digital Look make it 7.4% and GNK 4 x net debt/Ebitda versus MARS 5 x net debt/EBITDA. But in return GNK shares are rated a little higher?

GNK now has the scale but with it the risks of running a large acquired pub estate in a declining market for both pubs and beer. MARS has already sold off a lot of its wetled pubs, franchised some and is focusing upon its new build programme and breweries where accommodation, meals and premium bottled beer/cider may provide growth at higher margins. But then again GNK may be able to realise much larger efficiencies from its pub estate despite the economic headwinds, minimum wage and so on.

Who knows? I don't. But my gut has a slight preference for MARS at the moment, but that might just be because it's too accustomed to all those little hobgoblins :-)

cheers

[jeffian] 29/6/2017 09:47

GNK results out today rather support my view that brewing is the weak spot in the sector. In otherwise robust results, GNK's brewing/brands were slightly down, albeit maintaining market share. I think this is why the City is not bowled over by the CW acquisition.

[essentialinvestor] 28/6/2017 21:29

GNK tomorrow folks.

illis, luck with your holding.

[spacecake] 28/6/2017 21:26

Heineken - deep pockets, lots of competition around.

[illiswilgig] 28/6/2017 14:33

Essentialinvestor -

I think you are right. The market is now taking a downbeat approach to the UK economy in the near future.

In the case of Marston's I think its overdone. I think their estate with its new franchises, lodges and restaurants is being transformed and is more resiliant than the old pubco's. The network of premium breweries are likely to continue to increase their market share and volumes even as the beer market falls.

I'll be adding a few more at these prices, but I'm not in a hurry,

cheers

Illis

[illiswilgig] 28/6/2017 14:25

Defcon - thanks for the extract from the conference call - getting the canning line into the bargain and foregoing £6m of capex makes a good deal look even better to me.

much appreciated.

Illis

[hopefuldave] 28/6/2017 00:42

It's funny brokers keep raving on about 4% and more dividend payments, but if we are losing our capital by more each year, what's to point of staying with the company.?

[lord gnome] 27/6/2017 18:02

Spacecake - I agree, but I was looking for Marstons-specific items rather than the wider political backdrop. I do have other UK-centric stocks that have also taken a brexit hit. I can ride it out and wait for sentiment to change. Might even add a few more.

[essentialinvestor] 27/6/2017 17:30

Net debt with downside scope on freehold valuations, at a guess.

Not just MARS, look at the MAB or GNK price.

Potential for lower food sales, or margin compression in food
also a consideration imv.

You can make a case the share price already discounts this.

[spacecake] 27/6/2017 17:21

LG, What's not to like? What does the market see that I don't.

Auntie Theresa vs the Europeans, losing the two year squabble ?
Brexit will make Britain worse off says BOE ?
Another general election (next year)?
Return to socialism with labour government ?

All of those should lead to more ale being swilled.

[iaincc] 27/6/2017 13:17

Has anyone looked at the assets ?
The old CW brewery site must be worth > 100 million for housing development.
It is "Brownfield" so planning will be a pushover.
The brands are worth ~ 5 million
The Redundancy costs might be about the same but the net net looks very good indeed.

[jeffian] 27/6/2017 11:19

#2062,

It's unfashionable, has a rather died-in-the-wool board that plods along doing what it's always done, it doesn't take much notice of the City slickers, upset the City hugely with its dilutive deep-discounted Rights Issue after the 2008 credit crisis and dividend cut, and they don't like the latest acquisition to buy more (boring old) breweries and issue yet more shares in the process. How's that?!

Don't get me wrong, I'm not just knocking it; I hold quite a lot of these and have recently bought more as the price has gone down further, but the City is never going to give it a decent rating and will knock it on market weakness which is what I think is happening here.

[defcon3] 27/6/2017 09:15

Having been invested here for quite some time, I'm perfectly happy buying on these dips. The recent quarterlies were good, and the earnings report transcript was a good positive read. Happy tucking these away for the yield, as well as the growth I think we'll see when the sector finds a bit of love with the market..

[hopefuldave] 27/6/2017 08:59

I know how you feel! Very depressed watching this slide. I find as soon as I cut my losses, they then go up. So I'll try and be patient. Good luck.

[lord gnome] 27/6/2017 08:22

When I see a share price slipping away like this (especially after I've just added a further tranche at 141p) I get nervous. Is there something I don't know? I look at Marstons and see a growing company with a good business plan, low pe and high yield. What's not to like? What does the market see that I don't.
Answers on a post card please.....

[skinny] 27/6/2017 07:25

It still is :-)

[jeffian] 26/6/2017 23:03

I seem to remember that in it's day, Courage Directors Bitter was a very fine pint.

[defcon3] 26/6/2017 22:28

Illiswillgig,These were RF's comments in the recent earnings conference call:"The final point on supply chain is again really important. This acquisition brings with it a large lager brewery. We haven't currently got lager brewing capability so we will have that in future. There is a canning line, which carries out contract work for other brewers. We were on the verge of committing a GBP 6 million investment to a canning line in Burton-on-Trent to do just that, which we will no longer have to invest. And finally, it will make a difference to our cost of distribution. And this point was really amplified by the contracts that we reported on the statement today, one being the winning of the distribution contract for Punch B which is an exclusive contract which will apply from the 1st of September this year, and the second was the -- a similar contract on an exclusive basis for Hawthorn Leisure. And between those 2 contracts, those will add about 1,600 to 1,700 distribution points to our supply chain and enable us to have our brands listed across those pubs at the same time. And the key point is that the Charles Wells acquisition will make those contracts even more effective.What the acquisition will do for our market share is to increase our share of the total ale market from a current 11% to 16%; our share of the premium cask ale market to about 25%; the premium bottled ale share will go to 29%; and canned ale will go to 12%."

[illiswilgig] 26/6/2017 22:10

'The canning business was key to the Charles Wells acquisition. There's some great labels under that banner too, such as Bombardier, McEwans and Courage.'

Thanks Defcon3 I noticed that they stressed the canning business. Can you explain why its key? I thought canning was lower margin?

Hadn't noticed that Courage was one of the brands. My that takes me back! Whatever next......Watney's Red Barrel......... :-)

cheers

[illiswilgig] 26/6/2017 22:08

Much though I would like to see Marstons reduce their debt I doubt that investors would have paid up for a placing to reduce debts?

The CW Brewery acquisition is forecast to yield 18% ROIC in its third year.

Hard to get that through paying off debts?

Still like to see the debt go down just a little bit though,

cheers,

[defcon3] 26/6/2017 21:55

The canning business was key to the Charles Wells acquisition. There's some great labels under that banner too, such as Bombardier, McEwans and Courage.

[elmfield] 26/6/2017 21:47

SN just done a cracking job redoing their brewery.
Make a nice bolt on?