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2008-06-23
<p>Investment thesis<br/>UK Pub sector outlook<br/>Historically, the pub sector has been seen as both a safe haven for investors’ cash because<br/>the natural cash generation, capital disciplines and material freehold asset bases offer the<br/>potential for above average medium and long term rewards. Allied to this level of security is a<br/>top line performance that could morph from one which has traditionally been inflation-proof<br/>to one which should – for some groups – become one that could generate real long term<br/>growth because of the strength of the eating out market. This is a market that is dominated<br/>by the pub groups and a handful of pure restaurant companies in both the public and private<br/>sector. In the short term, however, concerns about a possible UK consumer slowdown or<br/>maybe even downturn, have and will continue to dog the sub sector.<br/>For the acquisitive stocks in the sector there remain plenty of opportunities for expansion,<br/>despite what seems to have been a continual stream of M&A activity over the past decade.<br/>This is because the pub market in 2008 is still more fragmented than in the days before the<br/>Beer Orders back in 1989. However, going forward, the quality of the businesses to be<br/>acquired will be far more important than the simple goal of achieving greater scale. This<br/>probably means that individual deals will be smaller in scale than those which have<br/>dominated the past five years.<br/>Valuation<br/>Whilst entirely understandable as an alternative valuation metric, the linkage to the property<br/>sector has, in effect, hijacked the valuation methodologies on which pubs should be based –<br/>namely their cash flows. Pubs are principally valued in the companies’ balance sheets based<br/>on the quality and stability of their cash flows. They are valued on an open market basis<br/>trading as pubs. The levels of cash yield are fundamentally different from commercial<br/>property, and pubs should not be valued in the same way, especially since location can play<br/>such an important part in commercial property valuations, as any schedule of regional rent<br/>per square foot will show. This is not the case with pubs. We have retained our cash flow<br/>based valuation models as the prime drivers of our target prices. We have used our forecasts<br/>for the next three years, adjusted for our expectations on the smoking ban, and then used a<br/>terminal growth rate of 2% in our DCF models for all the companies. We do not ignore the<br/>property assets, but we generally prefer to value companies based upon what we believe<br/>should happen (our forecasts) rather than what might happen (significant capital restructuring,<br/>asset sales or bid speculation).<br/>Where companies are in the middle of a share buyback programme, we have used the<br/>impact of year one only, and are “buying back” stock in our model at our target price, not the<br/>prevailing one. Furthermore, we see significant scope for further capital repayments and<br/>share buybacks for all of the groups researched in this note.<br/>Risks<br/>The sector is primarily exposed to the UK consumer through low ticket expenditure.<br/>Traditionally, pubs have been reasonably resilient in the face of a slowdown in consumer<br/>spending. Downside sector risks would include a slowdown or downturn in the pace of<br/>growth of the eating out market, a worse than expected outcome from the smoking ban in<br/>England, or significant fall in pub property values. Upside risks include scope for further M&A<br/>activity, little or no impact from the smoking ban, substantial capital restructuring, which<br/>could result in lower costs of capital or material share buybacks.</p><p>Table of Contents<br/>Investment thesis .............................................................................. 3<br/>“Show me the money” ..................................................................... 4<br/>Enterprise Inns - Buy ....................................................................... 20<br/>Greene King - Buy............................................................................ 22<br/>Marston’s - Hold .............................................................................. 24<br/>Mitchell’s & Butlers - Hold.............................................................. 26<br/>Punch Taverns - Buy........................................................................ 28<br/>Wetherspoon JD - Hold................................................................... 30<br/>Whitbread - Buy............................................................................... 32<br/>Valuation & risk ............................................................................... 34</p><p></p><p>
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2008-6-23 17:30:00

money是个好东东

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2008-11-21 06:08:00

好贵~~

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2010-7-28 13:35:25
不是最新的,有点贵
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