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Marston's
Wright suggests brewer and pub brand Marston’s is undervalued, highlighting that its debt levels have fallen after selling property assets and 60% of its brewery business to Carlsberg.
“The valuation it achieved on the disposal means that the remaining 40% of the brewery business that the company still own is valued at around £250m today,” he says.“
That compares to a market capitalisation for Marston’s of less than £200m. It is not inconceivable that somebody will buy that remaining stake from Marston’s in the future.”
Wright highlights that Marston’s has close to £1.8 billion of freehold property with just £1.2 billion of debt against it.
“The entire pub estate should also be able to generate operating profits of more than £170m in the near future,” he says.
“It is obvious that the shares are currently massively mispriced.”
Good quality food at very reasonable prices,in good locations and beer gardens with great ambience will see the company take advantage of competitors failure.
Sales increasing,so no aversion to alcohol from anybody by the looks of it. I like the modern format of this companies estate.It bodes well for the future,especially the beer gardens.Totally undervalued on every metric. This could easily 3 bag and still be cheap.Interest rates coming down will help investors to see the complete undervaluation on offer.
Shaperite
I totally agree with your summary, FD's view on the accounts and their quirks has been consistent & correct over the years I've been on this BB.
My gut when they were at 30p & below that they were trading like option money was not wrong either, every dog has its day, but some on this board don't seem to appreciate the headwinds facing MARS currently.
Not the least of which is an apparent aversion to alcohol intake by the younger generation, something I never expected to see in my lifetime but by the number of pubs closing in some parts of the UK this seems to be hurting.
As the contributor who began this discusion, I f ind Fairdealer20s annalysis overly compelling, a group like Marsdens should have more liquid assets than they have, the board were caught with their trousers down with regards to the Brains estate and in a declining market with increased prices will they be caught again with the rise of 10% in the minimum wage and all the subsequent add-ons. For the sceptics out there I AM AN INVESTOR not A SHORTER !!!!
The NAV is a combination of declared values. Property values are reviewed annually on a 1/3 of the estate on a rolling basis. Many of the fixtures/fittings/machinery is valued at cost with a determined annual write-down. Intangibles are included as an asset ( £32.9m).This is very questionable as it includes Goodwill which is not a number easily valued ( it could be worth nothing , it depends much on what the market considers a true value. Liabilities are well documented and cannot be disputed.
Total Liabilties at yr end amounted to £1814.3m.
Total assets £2454m.
My word "opaque" seems to have been interpreted as " misreported".....Wrong. To further qualify my " opaque" statement, the accounts disclose an Impairment in respect of leases of £4.9m. The Brains estate is 100% Leased. It is therefore reasonable to conclude some of this Impairment relates to Brains, even though not split out, hence "opaque" .
Comment regarding the rationale put out by RF in respect of the PLatinum offer, should be considered alongside events taking place at the time. RF was negotiating the deal with Brains. John Rhys ( Brain's CEO) was under significant pressure from Banks to reduce debt, consequently a deal was hastily arranged. Meanwhile the PLatinum offers were kept in the background. The Platinum offer was reasonable and in the opinion of some here could have been improved. That offer now seems to have been far better than anything likely to materialise now. It should be noted both Ralph Findlay and John Rhys resigned their roles shortly after the agreement with Brains completed.
Within 12months, Brains placed it's Freeholds for sale.
Now examine the prediction of a 70p T/O. A predator will want around a 20% profit on INvestment.
To achieve 70p an asset-stripper will need funds around £2454m ( £1815 to clear debts and £443m to compensate SH's)
Capital Markets currently offer 6+% . It's a no Brainer, a predator can achieve a fair return just leaving money on deposit and no uncertainty with the value of an asset where values are questioned. A predator may be interested given the uncertainties, if value is closer to 40+p.
The External Auditors report requires scrutiny.
They comment on several areas " the valuation of Freehold Land and properties has a high degree of estimation uncertainty"
Fairdealer - the calculation of the NAV takes all mortgages, charges and other agreements into account under standard reporting rules. So the Carlsberg "shackles" are taken into account in the NAV.
Likewise, you appear to claim that the Welsh estate has been misreported. What evidence do you have of that?
"You have commented on the declined offer made by Platinum in 2021. That offer was 107p at the 3 rd time and not put to SH's until completely declined by Ralph Findlay."
- It was turned down because it was deemed not to value the company adequately (as stated officially). Yet Platinum still made that offer in the first place, after placing two earlier (lower) offers, so they too clearly agreed that the business was at least worth that in spite of the above-mentioned "shackles".
The market not being confident about the company at present is an indicator of sentiment, it is not hard evidence of the company's health and NAV.
And this is where a takeover would be highly interesting for the company's new owners: if a consortium of parties that together don't need to borrow a substantial amount of money to pay off a large chunk of Marston's debt gets the business, then by indeed making that payment (or part-payment) of the debt, they would then enormously boost its profitability, especially in a period of high interest rates. As interest rates are getting increasingly likely to come down (albeit slowly probably) this year, it makes sense to buy the company sooner rather than later (so long as no money needs to be borrowed for that purchase of course).
Lejjb,thanks for the invitation. RNS invariably tend to provide only the good bits. One needs to dig into the small print.
For instance read the JV agreement with Carlsberg, it may open your eyes! Marstons are shackled to Carlsberg. Any potential suitor will do due diligence and discover any purchase of the property estate comes with conditions Carlsberg must agree.
The Brains estate of some 100 pubs are leased on a management agreement over 25 years. The returns on these pubs is a little opaque as incorporated with Marstons Welsh estate. In the prevailing economic climate the value of the Brain's estate is below the value at the beginning of the Lease agreement. It should also be noted, Brains sold the Freeholds of their estate to Song Capital in 2022. Song Capital will look towards extracting best value from the asset. This could involve restructuring of the Management Agreement.
You have commented on the declined offer made by Platinum in 2021. That offer was 107p at the 3 rd time and not put to SH's until completely declined by Ralph Findlay.
""So a high NAV means a business is comfortably solvent and can comfortably cover its debts""
Mmm the SP has been lingering in the low 30's for a very long time. The market must have doubts regarding such a large discount to asset value!!
Suggest the Director's Going Concern, statement is read, it is carefully crafted in a way that leaves doubts in their minds.
The best hope here is Jason Platt who officially begins a rejuvenation of the Company this week, is able to create the Shareholder value we all want/need.
.
And the last officially reported NAV (about 18 months ago IIRC?) was 98p per share. That does not at all factor in the value of Marston’s as going concern.
The SP is just below 34p as of Friday 5/1/24 COB.
Fairdealer - some of my response is in my reply to barchid. For the rest, I invite you to read all the RNSs since Spring 2020 and the Times article(s) from that year as well as the news of the rejected T/O offers of Q1 2021.
Barchid - assuming you are referring to this, https://www.voxmarkets.co.uk/articles/will-this-unloved-sector-perform-like-house-builders-did--907da66/ ,
unfortunately you have demonstrated that you listened to only one half of the material and publicly reported/ commented on the other half.
Key points:
1- the video covers several sectors, bars/pubs being only one of them.
2- the guest speaker said “lots of intrinsic value” for the pubs and bars.
3- The only moment he spoke of Marston’s was to say that it was the listed pub/bar company with the “highest margins” (at 23’00” approx).
4- However, when going beyond his factual claims, that guest comes across as an incredible idiot: when commenting at the majority of the pub/bars listed (NOT MENTIONING MARSTONS EXPLICITLY), he said that the high “NAV [was] offset by debts”. It’s an incredibly stupid statement: NAV / net asset value is literally [assets minus liabilities].
https://www.collinsdictionary.com/dictionary/english/nav So a high NAV means a business is comfortably solvent and can comfortably cover its debts.
Now there are other broader macro considerations also covered in that (very very amateurish IMO) video which do not necessarily paint a fully rosy picture but pubs / bars and Marston’s in particular are not particularly suffering from that direct and indirect (amateurish mostly) coverage, all things considered.
Sorry I need to mention that my post below should have been addressed to lejjb
In your research int MARS did you watch the vox markets video Friday 5th where they focussed on leisure & in particular on brewers and pubs ?
If you had you would have seen them discouraged by MARS because of the debt.
I think it is well worth a watch on youtube if you want to see independent research.
"Anyone who has researched this company and its history since 2020 will know why I’m saying that."
Please elaborate?
I genuinely believe Marston’s will get taken over above 90p per share by July, unless the SP rises organically to that figure before then.
Anyone who has researched this company and its history since 2020 will know why I’m saying that.
Still waiting for the re - rating , I wonder in which year it will appear ?
The LSE.co.uk log of trades is wrong (not the first time it happens), TradingView has shown transactions for that day.
Site not showing buys and sells in the morning....But...plenty of buying and selling in the afternoon.....A bargain ....now rerating....Expect good Christmas trading announcement ,very soon.....
Not a single buy or sell all day? Zero movement?
Https://www.mirror.co.uk/news/uk-news/thirsty-brits-down-400-million-31782414
Https://moneyweek.com/investments/top-stocks-for-the-new-year
Saxman -As Marston supply drinks to the MAB group we also all hope they do well too and Marston and the Brewery will benefit from their equal good fortune. GLA.
Let’s hope so as I am in deep I don’t think it will be as good as MAB
2024 expecting this to be a winner.
Last summary on the Marstons web for 2023 before we enter the growth 2024yr gunning for £1B in revenue.
Pubs to be proud of
Our core strategy and vision is of delivering ‘Pubs to be proud of’ remains unchanged. We achieve our goals, sustainable growth and value creation through our focus on people, experiences and responsibility.
1,414 Pubs and bars c.11,000 Employees £872.3m Total revenue £34.4m Net cash inflow.
2024 is going to be a growth year. Enjoy downing the shorts!
Barchid, I may have not been clear when stating the Brains Leasehold Pubs are of little value to Marstons. THey are held onshort term leases, Ralph Findlay and John Rhys agreed an up front payment ( 6 months Rent in advance). Brains were trying to avoid Liquidation. The terms were on the basis of full repairing leases ( the tenant agreed to repair and in many cases bring some run down pubs up to a good structural standard) there was a handful of Pubs which were so bad and omitted from the final transfer. Those Pubs and for that matter others, were not fully surveyed when the deal was struck. Brains(John Rhys) was anxious to get money in the Bank and Ralph obliged. Brains retained the freeholds on the basis they wished to take advantage of future capital appreciation. That was the story, however within 2 years (2022) the freeholds were sold to Song Capital. Make of that what you will, doubt Song have acquired as a good samaritan, more likely to extract better value from their Tenant!
Turning to the accounts it would do super puffer's limited corporate knowledge the world of good to read the Independant auditor's report. It has some very interesting phrases which could concern any LTH.
Some investors are here seeking a quick profit, but not really interested in the company's long term survival.