Broker snap: Panmure gives Marston's benefit of the doubt

9th Oct 2009 13:09

Ahead of next week's trading update from real ale brewer and pub landlord Marston's, broker Panmure Gordon has turned less bearish on the stock.Panmure Gordon now rates the shares a 'hold', up from 'sell', having adjusted its earnings forecasts in the wake of the brewer's recent rights issue.While 'not convinced that the new managed pub developments will deliver historical levels of returns,' the broker said it is 'prepared to give management the benefit of the doubt at this stage.'Marston's raised £176m through a right issue earlier this year and has earmarked most of it to build new food-led destination pubs as part of its so-called 'F-Plan' to serve food to families, females, forty-somethings and fifty-somethings. Pubs of this kind have achieved strong returns for Marston's, averaging 15% earnings before interest, tax, depreciation and amortisation return on invested capital in recent years.'Whilst the new build managed pub programme will improve the profit mix, at present the group still derives greater than 50% of earnings from leased and tenanted pubs and as such we are cautious ahead of the OFT's [Office of Fair Trading's] response to the CAMRA super-complaint regarding the 'Beer tie', due by 22nd October,' Panmure analyst Simon French said.The broker has trimmed its price target to 100p from 125p previously.