Young & Co's business is not difficult to understand. It runs and owns an estate of 242 high-quality pubs in London and the prosperous south east, which are generally regarded as some of the best in the business due to their location and the higher-end clientele they attract. Their financial performance certainly attests to this. However, when a business is as easy to understand and delivers as reliably as Young's does, it's easy for investors to simply forget about it between its six-monthly results announcements.
- History of share price outperforming pre-results
- High-quality estate
- Strong August sales for London pubs
- Increased focus on estate
- Wide bid-offer spread
This has created an opportunity for investors over the last three years to profit from buying shares ahead of the group's results and, with Young's interims scheduled for 22 November, there could be a very profitable trading opportunity here. Indeed, over the last three years, as our table shows, the shares have on average outperformed the FTSE All-Share by 7.7 per cent in the month leading up to a results announcement.
Performance over the month prior to interim results | |||
---|---|---|---|
2009 | 2010 | 2011 | |
Young's ord 'A' | -0.5% | 8.4% | 4.6% |
FTSE All Share | -0.7% | -1.0% | -7.6% |
Outperformance | 0.2% | 9.4% | 12.2% |
Performance over the month prior to final results | |||
---|---|---|---|
2010 | 2011 | 2012 | |
Young's ord A | -0.3% | 6.5% | 2.9% |
FTSE All Share | -6.1% | -2.7% | -6.4% |
Outperformance | 5.8% | 9.2% | 9.3% |
Source: Datastream
Although our figures are on a mid-price to mid-price basis and the spread on Young's shares can be very wide, a good broker should be able to trade well within the spread. Indeed, last week all buy orders went through at well below the offer price, with the final trade of 700 shares on Friday 14 September going through at just under 637p compared with a quoted spread of 615.5-648.5p.
Young & Co Brewery (YNGA) | ||||
---|---|---|---|---|
ORD PRICE: | 649p | MARKET VALUE***: | £285m | |
TOUCH: | 616-649p | 12-MONTH HIGH/LOW: | 700p | 555p |
DIVIDEND YIELD: | 2.3% | PE RATIO: | 18 | |
NET ASSET VALUE: | 659p | NET DEBT: | 37% |
Year to 2 Apr | Turnover (£m) | Pre-tax profit (£m)** | Earnings per share (p)** | Dividend per share (p) |
---|---|---|---|---|
2009 | 126 | 17.3 | 23.1 | 12.8 |
2010 | 128 | 17.5 | 24.9 | 13.0 |
2011 | 143 | 18.1 | 28.4 | 13.3 |
2012* | 179 | 21.3 | 33.4 | 13.9 |
2013* | 190 | 23.1 | 36.1 | 14.3 |
% change | +6 | +8 | +8 | +3 |
Normal market size: 400 Matched bargain trading Beta:0.2 **Pre-tax profits and EPS stated on an adjusted basis *Peel Hunt forecasts ***Includes non-voting shares |
Targeting a trading situation like this comes with the risk that history will not repeat itself. Therefore you need to weigh up whether the shares are worth buying on merit alone and, on this score, they easily rate a 'buy' in their own right. For instance, the company has been benefiting from its canny acquisition of the Geronimo estate of large London managed pubs in late 2010 from which it has extracted significant value. Young has also honed its focus by selling off a 40 per cent stake in a brewing joint venture with Wells in a £15.1m deal a year ago.
Reassuringly, trading so far this year has been good, with sales from Young's 121 managed pubs rising 10.1 per cent in the first 13 weeks of the current financial year, and by 4 per cent on a like-for-like basis. True, it's hard to predict how well the business has performed over the Olympics, but there are reasons for optimism as a recent Coffer Peach tracker survey for August, which monitors aggregated like-for-like sales data from 25 leading pub and restaurant operators including Young, reported a stellar 5 per cent like-for-like rise in sales for establishments inside the M25. It's worth noting, too, that sales growth from London pubs was "approaching 7 per cent".