Broker snap: Brokers raise glass to Marston's

18th Jun 2009 12:49

The share price may have tumbled dramatically in the morning trading session but the decision by pub owner and real ale brewer Marston's to raise £176m through a rights issue has been well received by two brokers."We see this [fund raising] as a positive move, putting the company in the forefront of those able to benefit from sector restructuring. It also brings more certainty to the dividend prospect," said long-time Marston's bull Paul Hickman at KBC Peel Hunt."We expect pre-tax profit could rise circa 20%, following use of expansion funds based on expected EBITDA (earnings before interest, tax, depreciation and amortisation) ROI (return on investment) of 15%. Benefits from bond repurchase would be additional to this," Hickman said. The broker retains its "buy" rating and 200p price target for the stock.Charles Stanley has a price target in the same ball park, at 190p, which would put the group on an enterprise value/earnings before interest, tax, depreciation and amortisation ratio of 9.9:1 for calendar 2010 based on the broker's earnings forecasts. The broker rates the stocks as a "hold", saying that it does not see much justification in chasing the shares beyond 190p, though on a discounted cash flow basis "there is support for a more aggressive price target."