Broker snap: JPM still cautious on pubs
JP Morgan has raised its ratings on pub groups Greene King and Marstons and downgraded JD Wetherspoon in a reassessment of the pub sector.
The broker notes recent REIT developments but envisages continued weak fundamentals.
It upgrades brewer and tenanted pub operator Greene King to 'overweight' from 'neutral' and Pitcher and Piano owner Marstons to 'neutral' from 'underweight'. It has price targets of 700p and 250p respectively.
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Meanwhile, pub leaser Punch Taverns sees its target rise to 900p from 700p after peer Enterprise Inns said it can now qualify for 'Real Estate Investment Trust' (REIT) status, which offers tax advantages. Punch is also likely to qualify for this, JPM said.
But the broker remains cautious on pub groups despite the excitement over REIT developments, with the effects of the smoking ban and cost pressures likely to be prolonged.
It downgrades budget pub group JD Wetherspoon and Restaurant Group, which owns the Frankie and Benny's chain, to 'neutral' from 'overweight'.
