Marston's (MARS)

[Bouleversee]

Thanks, Mon. I missed that as there were 2 threads running. Not looking good.

[idpickering]

Thanks, Mon. I missed that as there were 2 threads running. Not looking good.

Yes, thanks for that monabri. I'd missed Lorna's comment, sorry. As for MARS, I commented hereabouts a number of times that the size of the company bothered me, so much so that I finally bit the bullet and sold. I missed the 43% rise in SP today, so what do I know? Either way, I shan't be bothering with tiddlers any more. Good luck all.

Ian.

[idpickering]

COVID-19 Update re: securitisation waiver granted

We continue to take an extremely prudent approach in our management of the business during this period of unprecedented uncertainty, the timescale of which remains unclear pending further guidance from the UK Government as to how, and when, the current state of much reduced social activity can be relaxed and pubs allowed to re-open.

In addition to the actions which have been taken to reduce the Group's overall cost base, outlined in our previous update on 18 March, Marston's Issuer PLC has also taken the precautionary measure of securing a waiver of a breach that might arise under the 30 day suspension of business and operations provision under the terms of the Group's secured funding platform. The waiver has been granted until 29 May 2020 with an automatic extension to 15 June 2020 in certain circumstances.

https://www.investegate.co.uk/marston-- ... 00061169K/

Also on HYP Practical for HYPer chat.

[idpickering]

Change to Interim Results Announcement Date.

In line with the joint regulatory guidance from the FCA, the FRC and the PRA, regarding reporting timeframes in the current environment, Marston's confirms that it will announce its Interim results, originally planned for 13 May, in June 2020.

https://www.investegate.co.uk/marston-- ... 12178376L/

[idpickering]

COVID-19 Financing and Dividend Update

Further to Marston's announcement on 18 March 2020 and the subsequent directive from the UK Government on 20 March regarding the enforced temporary closure of all pubs and other hospitality venues to contain the spread of the COVID-19 virus, the Company today provides the following update.

We continue to take a highly prudent approach in our management of the business during this period. All Board members have volunteered significant cuts in pay and fees for the time being and recognise that Marston's many stakeholders, including employees, tenants and lessees, retailers, customers and communities are facing major challenges.

https://www.investegate.co.uk/marston-- ... 00088359M/

[MrFoolish]

Forming a JV with Carlsberg. SP up substantially.

[Breelander]

Forming a JV with Carlsberg. SP up substantially.

Here's an RNS

https://www.investegate.co.uk/marston-- ... 35547901N/

[Alaric]

Forming a JV with Carlsberg. SP up substantially.

It appears to be off loading its brewing side (retaining a minority interest) to concentrate on pubs and hotels. Seems a trend, Fullers did the same and Greene King was sold off in its entirety.

If you look at the small print on brands of beer in a supermarket, there's more brewed by Marston's than you might realise.

[spiderbill]

Is it just me or does that RNS just repeat the same things about 15 times without giving any indication of what the effects will be for shareholders?

[dealtn]

Is it just me or does that RNS just repeat the same things about 15 times without giving any indication of what the effects will be for shareholders?

Not to me.

In fact I wish more RNS were like this one. You get the summary, and then a lot of detail below. The company should be congratulated not many would do the same. Ordinarily you wouldn't find out such things as Carlsberg pension, call/put option terms to exit deal, Marstons agreeing to grant security over their shares, ....

[johnhemming]

If it has synergistic value of 24 million pa and Marstons have 40% of that why did the price go up so much?

[dealtn]

If it has synergistic value of 24 million pa and Marstons have 40% of that why did the price go up so much?

Well I don't know if those numbers are correct, but assuming they are £24m x 0.4 x 20(+) years = £192mio. Now strictly speaking you should be discounting, but interest rates are very low, and the agreement could go beyond 20 years.

Very crudely you could see an increase in enterprise value of that order, which is about the market reaction in the equity valuation is it not?

I wouldn't do it as simply as that but nothing obvious to say it is necessarily an over reaction by the market.

[Bouleversee]

Forming a JV with Carlsberg. SP up substantially.

It appears to be off loading its brewing side (retaining a minority interest) to concentrate on pubs and hotels. Seems a trend, Fullers did the same and Greene King was sold off in its entirety.

If you look at the small print on brands of beer in a supermarket, there's more brewed by Marston's than you might realise.

And that will be getting drunk more and more by all those stuck at home, which is most people, so why offload it? Even I have started to drink beer as cold beer is rather more refreshing than wine and not so sleep inducing in this hot weather.

I don't understand the s.p. increase either and look forward to an explanation.

[Alaric]

If you look at the small print on brands of beer in a supermarket, there's more brewed by Marston's than you might realise.

The definitive list is towards the end of the RNS

Key beer brands include Marston's Pedigree, Hobgoblin, Wainwright, Young's, Courage, Banks's and McEwan's.

[dealtn]

If it has synergistic value of 24 million pa and Marstons have 40% of that why did the price go up so much?

Well I don't know if those numbers are correct, but assuming they are £24m x 0.4 x 20(+) years = £192mio. Now strictly speaking you should be discounting, but interest rates are very low, and the agreement could go beyond 20 years.

Very crudely you could see an increase in enterprise value of that order, which is about the market reaction in the equity valuation is it not?

I wouldn't do it as simply as that but nothing obvious to say it is necessarily an over reaction by the market.

And even better, a lot of the synergy won't need discounting as they are also receiving a £273mio payment up front as part of the transaction.

[johnhemming]

There is the cash which helps with the 1.4bn of debt and potentially extra profit of 9.6m pa. Half of their loss last year. I suppose I sold out some time ago. However, although it may assist with whether they need to raise additional capital as a result of Covid-19 or how much I don't see it going that much further.

[simoan]

If you can't read a set of accounts, and particularly a balance sheet, then you won't understand why this deal is so good. Everyone has been concentrating only on Marstons debt and ignoring the tangible assets. It was on a PTBV of 0.4 before the deal was announced. The market is not efficient and has just realised how badly mispriced Marstons had been before yesterday afternoon. Luckily, I didn't Although, I would like to have bought more last week now!

This deal values the brewing business at £580m and yet the entire market cap was a smidge over £200m yesterday morning. Marstons retains 40% of a larger UK brewing business with the synergies and cost savings that will bring. Brewing is not a high margin business (8.4% operating margin last year compared to 20% plus for the pubs) and the intangibles (brands) and property assets associated with it were in the accounts for approx. £120m. So the vast majority of tangible assets (the pub properties) are still on the balance sheet whilst debt is reduced by £273m.

I don't agree that Carlsberg have effectively bailed out Marstons - this is an overly negative point of view. They have got a really good price and it's a win-win for both parties because Carlsberg need to scale up as part of the ongoing trend of the past few years in the brewing industry. Brewing is not high margin and so scale is important in maximising profitability. and Carlsberg have to compete with the likes of InBev, after all.

All the best, Si

[scrumpyjack]

Yes this has stopped them collapsing but I would be very wary of the robustness of the book value of their pubs.

The last block they sold (in November) only realised about 70% of book value (137 pubs, book value 62.6m, sold for 44.9m)

Pubs are hard to value and brewers normally value them based on their trading profits, not their open market value or allowing for possible change of use.

That value will have tanked due to the very difficult trading position (and trading outlook) for pubs.

I do not hold the shares and am mightily relieved my Greene King shares were taken off my hands by that nice far eastern gentleman!

[simoan]

Yes this has stopped them collapsing but I would be very wary of the robustness of the book value of their pubs.

The last block they sold (in November) only realised about 70% of book value (137 pubs, book value 62.6m, sold for 44.9m)

Pubs are hard to value and brewers normally value them based on their trading profits, not their open market value or allowing for possible change of use.

That value will have tanked due to the very difficult trading position (and trading outlook) for pubs.

I do not hold the shares and am mightily relieved my Greene King shares were taken off my hands by that nice far eastern gentleman!

Yes, I agree about the pub property valuations but even at the time the last disposal was not a good guide to the value of the rest of the estate as they were from the long tail of less profitable properties IIRC. Even if we were looking at large discounts to the asset value in the accounts (currently ~£1.8bn) it still provides a large margin of safety, which is what good old fashioned value investing is all about.

And of course, post transaction and mostly shed of the low margin, low asset brewing business, and with debt reduced, who's to say it is not an even more attractive asset than Greene King? In a negative interest world with money looking for a good home, I am not convinced the new version of Marstons will be independent for too long.

All the best, Si

[scrumpyjack]

You may well be right and when the CV dust settles a bid will come along.

But re the point about the pubs being less profitable ones, that should already have been baked into a reduced book value.
The pubs are regularly reviewed by specialist valuers and ones with trading problems written down. These had clearly not been written down nearly enough

Best of luck!