W&DB shares may hit £11 says analyst

Shares in Wolverhampton & Dudley Breweries continue to soar following the Pubmaster defence and strong full-year results. One analyst believes they could reach £11.00-per-share.

The shares are currently trading at 620p, but the price may still have some way to go - last week one Wolves director was still buying shares, and some industry experts see a big upside.

One analyst who did seem to get it right last summer was John Walters of Williams de Broe. At the time of the Pubmaster bid he said: "The offer [of 513p-a-share] is absurd. It does not recognise that since talks started last year, Wolves' forecast earnings and multiple have both increased."

At the time, Mr Walters set a short-term target-price of 560p and a two-year target of 850p-a-share.

Speaking to the Publican.com today (Wednesday, January 16) Mr Walters said he still felt entirely comfortable with his recommendations. "I was surprised the price went through 560p as quickly as it did but I still stand by what I said.

"It's not rocket science - the company looks set to grow earnings by 10 per cent this year. If it can do that each year and return the money to investors that it said it would, the shares will get back to a decent multiple, similar to its peers, like Greene King.

"If all those things happen, the shares can go as high as £11.00 within two years."

After defending the £485m hostile bid that valued the shares at 513p, the price has climbed from well below 500p to a high of 629p.

The stock really took-off following strong full-year results, announced in November, which saw underlying profits rise 17 per cent to £76.1m.

Before Christmas, the group announced it would return £76m to shareholders through a one-off 80p-a-share dividend. It will return a further £24m through market purchases this year, and is set to return another £100m to shareholders in April, 2003.

Chief executive Ralph Findlay said the surge was due to improved communications between the company and the City.

"We are now in a position to explain to shareholders and potential investors what a good company this is," he said. "For the best part of four years, because of various bids, we have been restricted in what we could tell the market because of takover panel rules."

Mr Findlay also said that stocks such as W&DB were favourable because of current conditions. "Companies that were perhaps seen as old-fashioned - that have a reliable track record and stable growth - are more appealing at the moment."

The current Wolves share-price flies in the face of assertions that the stock would drop to 350p if the Pubmaster bid failed.