Costs in the pub sector are likely to remain 'sticky' in the immediate future, making like-for-like growth difficult for the UK's big chains, according to Stifel.
In a note to clients, the investment bank marked out Youngs (Young & Co 'A') and Loungers PLC (AIM:LGRS) as its top picks, while upgrading Marston's PLC to 'buy' from 'hold', with a new target price of 40p while lifting its valuation for Mitchells & Butlers PLC (LSE:MAB) by 10p to 285p ('buy').
"Operators with higher margins are better placed to contend with sticky costs. Young's is the market leader with a 21% EBITDA margin, and Wetherspoon the laggard at 9%," Stifle said.
"Those that profitably expand their estates can benefit from leveraging central costs over a growing business."
Stocks Reviewed:
- Fuller Smith & Turner PLC (AIM:FSTA) (Hold, 572p)
- J D Wetherspoon PLC (Hold, 768p)
- Mitchells & Butlers PLC (LSE:MAB) (Buy, 238p)
- Marston's PLC (Buy, 29p)
- Young & Co’s Brewery PLC (Buy, 1055p)
- Loungers PLC (AIM:LGRS) (Buy, 208p)