Analyst: Wetherspoon to double pub estate
JD Wetherspoon is on course to double the size of its pub estate and treble profits, according to City analyst Paul Hichman.
The analyst, who works for KBC Peel Hunt said: "It has a clear strategy to increase the size of the estate to 1,500 pubs, twice its present size. This company saw dramatic growth in the 1990s, and has the will to achieve that again.
"Wetherspoon has played a leading part in the transformation of the British pub, following licensing deregulation, local authority licensing, the smoking ban and the recession. As a result its business model has moved from the periphery of the market to its centre. "Following refinancing, Wetherspoon is well equipped to press ahead on physical
expansion. "Fundamentally we believe the company is a winner in a sector that has serious casualties, and where there will be numerous site consolidation opportunities.
"We fully expect our forecasts, which are close to consensus, to be upgraded over the next two or three years.
"We have modelled the roll-out from the current 746 pubs to 1,500. We project this size being reached in 2022, equivalent to Profits Before Tax of over £200m and EPS of 100p. The 1,000th pub would open in 2015, when Profit Before Tax would be £116m and EPS 56p. Were the company to make a block acquisition of sites, these timeframes would obviously be shorter.
"On the basis of a 12x PE (average for the peer group) the shares would be valued at 1200p at maturity. On a yield basis the share price would be at least 1400p."
