Investment Column: Right time to raise toast to Greene King

Greene King

Our view: buy

Share price: 472.7p (+23.7p)

Investors raised a glass to Greene King yesterday after the pub and brewing company delivered bullish trading, boosted by tasty food sales. The operator of the Old English Inns also reinforced its focus on pub food by acquiring Cloverleaf Restaurants for £55.8m.

For the 38 weeks to 23 January, Greene King's underlying retail sales rose by 3.9 per cent and its Belhaven operation in Scotland also chipped in with growth of 3.6 per cent. More significantly, its retail division expects margins to be "slightly ahead of last year". Such upward momentum is driven by the pub operator's food division, which grew underlying food sales by 8.2 per cent over the period.

Further evidence of Britain's love of pub grub came in the shape of soaring sales up 10.3 per cent at Hungry Horse, its largest retail brand famous for its 17-inch plate. However, there was less fizz at Greene King's brewing business, which makes Old Speckled Hen and Greene King IPA, as own-brewed volumes fell by 3.3 per cent, although this compared favourably with a UK ale market down by 7.6 per cent.

Last year we advised holding the stock, largely on an uncertain outlook for consumer spending, but now think we were too cautious. Despite rising strongly from a 12-month low of 372p in June, Greene King still only trades on a forward earnings ratio of just under 10.

Its acquisition of Cloverleaf – which used the remainder of the £207m Greene King raised in a rights issue in 2009 to fund its expansion – could give its growth a further shot in the arm. Greene King said that Cloverleaf's existing 12 large, freehold pub-restaurants were growing ahead of its own and it will invest about £25m in 10 more sites in the pipeline. Overall, Greene King has proved itself in terms of its balance sheet and profit growth to have a model for all seasons. Buy.

RPC Group

Our view: buy

Share price: 269.5p (-0.5p)

The last time we looked at RPC, it had posted a trading statement showing gains in revenues, sales and prices. Yesterday's update continued the trend, with the plastic packaging supplier reporting higher third quarter results thanks to growth in the personal care and coffee capsule sectors. Revenues were boosted by the improved volumes and higher prices as rising polymer costs were passed on to customers.

At the same time, RPC said its cost- cutting programme was reaching the end, with the company progressing with the closure of its Netherlands site. Such moves – it has shut five sites so far – should keep the business on a firm footing as RPC's markets pick up. A leaner operation will also help the company deal with any wobbles in the wider economy. But should you buy?

In a word, yes. Beyond the strengths of the business, investors should look closely at the valuation, which remains unquestionably thin. In fact, on Panmure Gordon's numbers, the stock trades on multiples of less than 10 times on the forecasts for 2012. The figure falls to below nine times on the broker's estimates for 2013. Given the outlook – Panmure anticipates double- digit earnings growth in the years ahead – this appears far too harsh. Wade in now before the market wakes up to the gap.

MBL Group

Our view: sell

Share price: 56.5p (-21.5p)

MBL may feel that in the business of supplying large retailers, independent stores and export customers with DVDs, CDs and video games, the landscape is shifting under its feet.

This is a market in structural decline, and MBL released an update yesterday that was not for the faint- hearted. Management said the conditions had deteriorated since it revealed in December that trading was "challenging" and yesterday warned that profits would be "substantially behind management's revised expectations".

Competing with online giants such as Amazon and online piracy has proved a struggle for the entire industry, which is increasingly moving digital. Also, MBL's contract with Morrisons has lapsed and now has to enter a competitive tender to win it back. The company is also trying to diversify but admitted the strategy was burning cash. It added yesterday it was no longer in takeover talks.

It has reshuffled management roles at the top to spark a recovery but despite a valuation of 2.14 times estimated earnings in the year to March, we feel investors should stay away.

Suggested Topics
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
David Moyes and Louis van Gaal
Former Governor of Alaska Sarah Palin, left, with her daughter, Bristol
newsShe's 'proud' of eldest daughter, who 'punched host in the face'
New Zealand fly-half Aaron Cruden pictured in The Zookeeper's Son on a late-night drinking session
A cabin crew member photographed the devastation after one flight
Life and Style
Carol O'Brien, whose son Rob suffered many years of depression
healthOne mother's story of how London charity Maytree helped her son with his depression
Life and Style
food + drink
Arts and Entertainment
The cover of Dark Side of the Moon
musicCan 'The Endless River' carry on the tradition? See for yourself
Rob Merrick's Lobby Journalists were playing Ed Balls' Labour Party MPs. The match is an annual event which takes place ahead of the opening of the party conference
newsRob Merrick insistes 'Ed will be hurting much more than me'
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
Liam Payne has attacked the media for reporting his tweet of support to Willie Robertson and the subsequent backlash from fans
peopleBut One Direction star insists he is not homophobic
Life and Style
healthFor Pure-O OCD sufferers this is a reality they live in
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
Sexual health charities have campaigned for the kits to be regulated
healthAmerican woman who did tells parents there is 'nothing to be afraid of'
Life and Style
Arts and Entertainment
The John Peel Lecture has previously been given by Pete Townshend of The Who, Billy Bragg and Charlotte Church
musicGodfather of punk will speak on 'free music in a capitalist society'
peopleAt least it's for a worthwhile cause
Shoppers in Covent Garden, London, celebrate after they were the first to buy the iPhone 6, released yesterday
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Quantitative Risk Manager

Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

Day In a Page

A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments