Greene King - slight seasonal blip

Greene King: This seasonal trading update could be seen as a bit mixed, with something for both bulls and bears. Retail LFLs were up 2.0% over the festive period, meaning that year to date the measure is +0.6%. However, since then LFLs are only flat in somewhat soft trading, although they do point out that they were up against some tough comparatives from this time last year. They also note an impact in Scotland from new, tougher, drink driving laws. Whereas the breath test in the rest of the UK stays at 35mg, in Scotland it is now 22mg, in line with most European countries. So it probably just as well that they are custodians of Belhaven 80 Shilling, rather than Tennent’s Super. Greene King also mentioned a soft run up to the festive season, citing their survey that in November household leisure spending was down 8% year-on-year. However, that survey pre-dates the bulk of the stimulus as oil price falls fed through to forecourt petrol prices. The Spirit Pub deal has been approved by both sets of shareholders, so it is now eyes down for any horse-trading required by the competition authorities, with completion hoped for in the first half of 2015.

For the year to end-April 2015 eps of 61p would be a flat year before growth of c10% in each of the next two years (plus Spirit on top). That 61p supports a twice-covered dividend of 30p, to give a PE of 12.9x and a yield of 3.8% at 789p. Despite having edged up from 755p, when I wrote on the stock in early December, these metrics still offer good value and the stock appears a good tuck away. At current prices I reckon there is a couple of pence also to squeezed out by buying via Spirit instead, if you are happy that the deal will go ahead and not be blocked. (Neil Cumming^, 19^th January 2015)

These comments are not a personal recommendation to deal. Any investments can fall as well as rise in value, so you could get back less than you invest. I may have a financial interest in some of the stocks written about. www.dividendpower.co.uk or e-mail at info@dividendpower.co.uk  Twitter:  @DividendPower