N+1 Singer - Greene King - Low growth = utility type assessment

We are downgrading the stock from Buy to Hold, setting 800p as our new 12m TP and lowering our FY17/FY18 EPS expectations by 7%/10%. This takes us 3%/8% below consensus. Trading has been mixed for c.3 years and the anaemic 3 year EPS CAGR of 3% is uninspiring. Until management can evidence a higher growth rate we feel the group should be viewed as a utility type stock with yield being the main attraction. We prefer Marston’s in the sector and are buyers of it ahead of next weeks YE update.

N+1 Singer - Morning Song 29-06-2016

Greene King (GNK LN) Stronger than anticipated finals | Harwood Wealth (HW LN) Interims in-line, healthy acquisition pipeline | Infrastructure India (IIP LN) Sale of interest in WMP toll road completes | OMG (OMG LN) Appointment of Non-Executive Chairman

Reasonably attractive risk-reward

We are lifting our 12m TP by 14% to 1030p to reflect upgrades post recent interims and stay at Buy. Our positive stance is purely a valuation call as the FY17 spot multiples are attractive given a 3 year EPS CAGR of 10% and a c.4% yield. Our concerns about the Spirit deal furthering GNK’s exposure to wet sales and earnings growth largely being synergy driven have not eased. But we acknowledge the Group’s strong track record, enhanced FCF and an attractive pub estate.

Satisfactory Q3 update

A satisfactory Q3 trading update from Greene King this morning which shows it had a strong Christmas and that the LFL trend has improved in Q3 vs H1. No consensus upgrades envisaged this morning, but in the context of mixed peer updates recently, today’s news should be viewed favourably. We stay at Buy with a 900p Tp.

Growth baked in

Greene King has developed a reputation as a leading pub company combining a consistent record of successful earnings growth and a meaningful dividend yield. Now 80% larger by market cap than its nearest peer, it continues to lead the consolidation of the sector. Its latest acquisition, of Spirit Group, is integrating well, which significantly underpins earnings and dividend growth over the next two years.

Strong interims, we upgrade to Buy

A stronger then anticipated set of interims from Greene King this morning which should be well received by investors. Current trading appears to be good albeit no LFLs are given. There is good news on Spirit synergies and we envisage three year consensus forecast moving up by 3-5% post the results. The shares should react positively today and we move from Hold to a Buy with a 900p TP.

Morning Song

BREWIN DOLPHIN HLDGS (BRW LN) Finals in line, positive margin progress | FINDEL (FDL LN) Is this why Sports Direct bought at 200p? | GREENE KING (GNK LN) Strong interims, we upgrade to Buy | IOMART GROUP (IOM LN) In-line interims; small adjustments to forecasts

In line Q1 trading update

An in line Q1 trading update from Greene King this morning. LFL sales growth of 1.3% at the Greene King Managed estate is an improvement on the 0.6% reported after 8 weeks, but it's the least we expected given a soft Q1 comp of 0.4%. Trading across the rest of the business is mixed in our view and there's nothing tangibly new around Spirit. Overall, the update reinforces our view that despite a macro tailwind, intense competition is proving a hinderance to strong pub-restaurant sector top and bo

Upcoming Q1 update unlikely to be a positive ST catalyst

We use this note to preview the forthcoming Q1 update and formally publish our new forecasts and target price post the Spirit merger. We anticipate another sluggish trading update next week despite soft comps. If proved correct, this will act as a further ST sentiment drag for both GNK and the sector in general. We have mixed views about the Spirit deal and reinforce the pros and cons in this note. The main positive is that the deal has helped lift the 3 year EPS CAGR from 5% to 8%, but we quest

Morning Song

Carclo (CAR LN) Trading in line | Greene King (GNK LN) Upcoming Q1 update unlikely to be a positive ST catalyst | Horizon Discovery Group (HZD LN) Collaboration with Redx Pharma | Lookers (LOOK LN) Benfield acquisition for £87.5m – 12.5% upgrades in 1st full year (FY’16) | Redde (REDD LN) Upgrading PBT, strong growth drives dividend | Summit Therapeutics (SUMM LN) Dr Ralf Rosskamp appointed Chief Medical Officer

Finals in line but current trading continues to disappoint

An inline set of finals this morning from sector stalwart Greene King. The numbers graphically show that the previous year was a difficult one, with PBT -3% and EPS effectively flat. The current year has not got off to a much better start with weak LFL’s reported after 8 weeks despite softer comps. This further brings into sharp focus the lack of momentum in the Greene King managed estate and the impact an increasingly competitive market at the value-end is having. There is no fundamental new ne

Forthcoming finals previewed

The big event in the Leisure sector next week will be Greene Kings finals on 1st July. These will highlight a difficult 12 months with PBT projected to go backwards (we estimate -3%). The industrial and financial logic of the Spirit deal are well understood and the market will be looking for more colour on synergies, brand rationalisation and organic expansion next week. All this could be overshadowed if current trading remains challenging, despite soft comps. We have no huge axe to grid against

Morning Song

Ergomed (ERGO LN) Service offering gaining traction | Greene King (GNK LN) Forthcoming finals previewed

Cornerstone FS+ (CSFS, House Stock at 11.5p) - Another smashing trading update

Cornerstone FS+ (CSFS, House Stock at 14p) - Bearing growth aplenty

SSP Group+ (SSPG, House Stock at 213p) - Starting to fly, forecasts maintained

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SSP Group+ (SSPG, House Stock at 208p) - FY23F results preview

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Morning Note – 12 July 2023

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