Greene King stock tipped for further gains
Greene King shares have been on a tear over the past year and they closed at 674p on Friday.
That represents a 46% increase over the past 52 weeks and investor Ian Cowie believes there is still plenty more scope for the brewer and pub operators to outperform the market.
The Sunday Times’ personal account columnist bought shares in the business when they were 490p last year.
Britain then basked in glorious summer weather and England enjoyed an unexpected run to the World Cup semi-finals, boosting the sector and helping Greene King enjoy a strong trading period.
Cowie reported his delight at his decision to ignore his doubts and back the brewer at a time when pessimism abounded.
“Pessimism about this £1.5 billion business looked overdone,” he said. “I bought its shares at 490p – 20% less than they had cost a decade earlier and priced at 6.9 times corporate earnings, locking in a yield of 6.8% on which there is no further tax to pay.
“Greene King closed at 674p on Friday – or 37% more than I paid a year ago – and I believe there is further to go. Buyers today can still obtain a market-beating yield of 4.9% and the price/earnings ratio of 10.7 remains undemanding.
“Everyone knows how expensive beer has become and that drink-drive laws have forced many pubs to close. Few folk, though, seem to have noticed how resilient businesses have always innovated to survive in the past – and Greene King will celebrate its 220th anniversary this year.
“Even fewer investors seem to have considered that most millennials have no mortgage to pay these days and so have spare cash to spend – or, further out, how driverless cars might bring country pubs within reach once again.”
The firm will appoint Nick Mackenzie as its new chief executive when incumbent Rooney Anand stands down on May 1. Mackenzie joins from Merlin Entertainments, where he is responsible for the Midway portfolio of attractions, including 100 businesses around the world such as Madame Tussauds, the London Eye and SeaLife centres. He has also worked with Bass and Allied Domecq as acquisitions director.
It also named 28-year-old Ross O’Hara as its new head brewer, the 17th in its 220-year history.
In the past year it has taken on distribution of Estrella Galicia and launched a 0.5% version of its bestselling brew, Old Speckled Hen.
Old Speckled Hen is the UK’s second bestselling premium bottled ale, after Doom Bar, and the second highest selling canned ale after John Smiths. Old Crafty Hen is sixth in the PBA chart.
Greene King shares opened at 663.8p today.