Marston's brewing business is an ignored asset, says Canaccord

Fuller's sales of its London Pride brand and other brewing operations for almost 24 times profits has led broker Canaccord to rethink valuations of other pubcos.

As a result, Canaccord upgraded its recommendation on Marston’s to 'buy' from 'hold' and increase the target price to 115p from 105p, while reiterate its 'buy' for Greene King but increasing the target price to 695p friom 600p.

"Our analysis suggests that the brewing divisions of both companies are undervalued," said analyst Nigel Parson. "Marston’s Brewing is the better business, in our view, and it is potentially a strategic asset to an international brewer seeking a market entry to the UK."

Marston's share price is little changed over a decade and Parson sees the changing shape of board composition as a "potential catalyst" for a "compelling investment case", as the brewing arm has been "largely ignored by investors".

There is "no room" for mid market brewers any more, the analysts reckons.

Fuller’s surprise decision to sell its brewing business has been accused of selling its heart and soul and its spiritual home, yet Parson focused on the fact that the brewery "was being progressively squeezed between the huge and growing marketing and distribution powers of the big brewers, a theme we trace back to the Beer Orders of 1989, and the rapidly growing micro brewers, a theme we trace back to the introduction of Progressive Beer Duty in 2002."