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The Jolly Greene King Could Build Share Value with its Giant Pub Chain.

By Malcolm Stacey | Saturday 11 February 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Hello Share Pitchers. You may have heard me say a few times that the drinks trade is worth a look - if only because people seem to be boozing more than ever these dark days. An easy way to cheer yourself up, you see.

I’ve earlier commended to your researches Diageo (DGE) the big brand giant which  has done rather well since then. But let’s now look at a related sector - the big pub chain.

Greene King (GNK) had a good Christmas with sales up by 4.5% in the three weeks surrounding the 25th. And sales have grown generally this winter, though not by very much. Still any improvement in a modern world which sees so many pubs close, is a feather in Green King’s cap.

Greene King has merged with a similar outfit called Spirit and is now set to benefit from common ground. Greene King feels the link-up and its enviable synergy will be even more positive in the future. And though they would say that, there is usually a big advantage in pooling recourses. Not just because of easier administration, but the economies of greater buying power.

It has also been shedding some pubs - 60 fairly recently and another 50-60 pubs this year, raising as much as £40m. It still has more than 3,000 pubs, restaurants and hotels.

However, at least one analyst, Canaccord has reduced it estimates for Greene King’s earnings in 2017, so not everyone agrees with me that the share price should rise. 

Still, I think the public and particularly families are supportive of big pub chains. Its perhaps not an idea situation, but I do find big pub outfits, like Wetherspoons (JDW) for example, can often keep prices down.

Two rather encouraging figures I have for Greene King is a PE of 10.6 and a yield of 4.4%.

But it’s not so far offered to buy the Punter’s Return. God bless.

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