Target prices for British pub owners cut

Target prices for British pub owners cut

RBC Capital issued a note to investors titled “European Leisure – Pubs annus horribilis”. The Brokerage says:

  • JD Wetherspoons (JDW.L) has negative working capital position of £255m with only £189m liquidity headroom, as the company has relatively late payment conditions; while JDW’s debt covenants are unknown, RBC estimates suggest the company could breach them
  • Mitchells & Butlers (MAB.L), which has already breached one covenant, would need further covenant waivers to survive
  • Marstons (MARS.L) is in a difficult position; the company has £125m negative working capital will need lot of goodwill from suppliers and extra liquidity to continue

Meanwhile, investment bank JP Morgan sees ‘precarious times’ for UK pubs, cutting 2020 earnings estimates for UK pub companies by an average of two-thirds to reflect the Covid-19 shutdown. It cut its target prices for pub groups:

  • Mitchells & Butlers (MAB.L) from 490p to 340p
  • Marstons (MARS.L) from 128p to 57p
  • JD Wetherspoons (JDW.L) from 1100p to 600p
  • Young & Co (YNGA.L) from 1550p to 1230p

Across the board, financial institutions are expecting the UK pub sector to have a very hard time for the rest of 2020 at least.