RE: HSBC Downgrade or not?1 Sep 2017 13:47
Analysts at the broking arm of high street banking giant HSBC are worried that the UK pubs sector faces “twin risks from consumer weakness and rising input costs” and have downgraded their ratings for both Greene King PLC (LON:GNK) and JD Wetherspoon PLC (LON:JDW) as a result.
In a sector review, the HSBC analysts said: “We can’t be sure of a consumer downturn, but do worry about the continued increase in costs and the ease with which this can be mitigated.”
READ: Greene King's full-year profits fall on Spirit Pub integration costs
They added “Operators have already struggled with this even in a benign consumer environment. We don’t see obvious valuation support, and think downgrades will drive share price weakness. “
The analysts cut their rating on brewer and pubs operator Greene King to ‘reduce’ from ‘hold’ and lowered their target price to 595p from 680p amid concerns over its cost outlook in particular."
Definitely Greene King. The strength of the bounce back already shows me the advice was erroneous. 675p to 700p is probably fair value and 650p too cheap. I don't think there are surprises in the pipeline. The balance sheet is packed with frehold pubs so there is good cash generation. Value will out here.