The Investment Column: Regent remains a money-spinner

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The Independent Online
Regent is one of the many go-go pub stocks which have been able to achieve both booming profits and a soaring share price. That was until six months ago. Since then, Regent's shares have slumped. From a high of 373.5p, they have dropped to 324p, down another 12.5p yesterday despite the announcement of a 57 per cent rise in pre-tax profits to pounds 12.6m for the year to July.

The fall has been caused by fears that Regent will be hard pushed to sustain this growth rate. It is true that the rate of expansion is bound to slow.

Like-for-like sales growth is running at 7 per cent, which compares with the double-digit growth the group has achieved over the past few years.

Even so, Regent should still be able to increase profits by at least 30 per cent both this year and next. It plans to open 30 pubs in the next 12 months, close to double last year's total of 17.

Given that most of the group's estate still lies within the M25, there is plenty of scope to expand across the country. It has already gained a foothold in the Midlands and the North.

Its new pub brands, such as Walkabout Inns, a chain of Australian theme bars, are going great guns.

The nationwide expansion of its Jongleurs comedy club should also prove to be a money-spinner.

The fear is that sites will eventually dry up as competitors scramble for the choice locations, while the length of time taken to get an licence grows all the time. However that should not hinder Regent unduly for the next few years at least.

Wise Speke forecasts current year profits of pounds 16.5m, putting the shares on a prospective price/earnings ratio of 20.

The group's great growth potential justifies this premium rating. In fact the recent slide in the share price makes Regent look attractive.