Broker snap: Views differ on Wetherspoon

4th Nov 2009 12:02

Charles Stanley has reiterated its 'buy' recommendation for JD Wetherspoon after the pub group's trading statement.The cut price food and booze pub group released what the broker described as 'an upbeat trading statement' with like for like (LFL) sales in the 13 weeks to 25 October up 0.3% year on year.The broker has previously suggested that the only possible cloud on the Wetherspoon horizon has been the group's refinancing, targeted for the first quarter of 2010, but Charles Stanley analyst James Dawson appears to be encouraged by the group's assertion that it intends to start formal refinancing discussions by the end of the year.'Whilst there is minimal comment with reference to the remaining refinancing, what is stated seems to imply confidence in completion,' Dawson deduces. 'This indicates to us that the steps taken to preserve cash flow are being recognised by the banks, although only time will tell when the actual renegotiations are undertaken.'The broker has a 600p price target for the stock.Investec has also issued a 'buy' note on the company, saying that the 'planned VAT increase remains the biggest negative risk for Wetherspoon (and other pub operators) but is unlikely to prevent future upgrades.'Collins Stewart is a dissenting voice, noting that the LFL sales growth figure of 0.3% 'suggests negative territory later during the first quarter, since the first five weeks started 1.2% up.'The broker believes underlying trading is soft 'which is likely to manifest itself in increasingly weak like for likes from the second quarter onwards.'The broker has reiterated its sell recommendation and 400p price target.