Shore Capital has reiterated its Buy recommendation for pub group Marston’s PLC (LSE:MARS), highlighting the company’s stronger-than-expected cash generation and its accelerated debt reduction.
The broker now forecasts that Marston's net debt will fall to approximately £920 million by the end of the 2024 fiscal year, a significant milestone achieved two years ahead of schedule.
Shore Capital has adjusted its 2024 earnings per share (EPS) estimate for Marston’s to 5.9p, primarily due to the timing of the company’s disposal of its stake in Carlsberg Marston's Brewing Company (CMBC).
The broker notes that while the disposal is expected to be broadly earnings neutral for the current fiscal year, it enhances the quality of Marston’s earnings by reducing leverage and providing greater visibility on future cash flows.
Shore Capital also observed that Marston's might focus future deleveraging efforts more on profit growth rather than further reductions in net debt, potentially using excess cash flow for reinvestment or shareholder returns.
“Destiny appears to be increasingly back in Marston’s hands and in this note we set out potential options, including a refinancing, shareholder returns and capital investment,” said analysts.
“With the balance sheet and valuation potentially at an inflection point, we await the autumn investor day with interest.”