Marston’s (LSE:MARS) is an owner and operator of UK Pubs. To say that 2020 was a tough year for the business is a bit of an understatement. Its share price crashed by nearly 65% in the first three months as pubs across the country were forced to close their doors to customers. With no pints being served and plenty of expenses still to pay, the company saw its losses surge to nearly £360m.
But over the last 12 months, the Marston’s share price has begun rapidly recovering. While it is still trading below pre-pandemic levels, the stock is up more than 170%. Can it make a complete recovery in 2021? And should I be adding this business to my portfolio?
The rising Marston’s share price
Here in the UK, the vaccine rollout has been progressing relatively quickly. In fact, based on the latest figures, almost 50% of the population have had their first dose. That number increases to around 95% for individuals over the age of 50.
This has ultimately led to a significant drop in infection rates. So lockdown restrictions have begun to ease. This is especially exciting for pub operators like Marston’s, which can finally start generating income again.
As of April 12, the company reopened 70% of its locations. That’s about 700 pubs. But what I find pretty encouraging is that while its locations were closed, the management team decided to make the prudent decision of investing in the expansion of outdoor areas, enabling a larger serving capacity today.
What’s more, the company was also able to secure financial waivers on its loans until January 2022. These debts will eventually have to be paid. But in the meantime, it gives the business some breathing space to get things back on track. And with the rest of its locations set to reopen by mid-June, I think the Marston’s share price could make a full recovery by the end of 2021.
Some risks to consider
Current analyst forecasts estimate that the business will suffer a smaller loss of £44m this year and eventually return to profitability in 2022. However, this is based on the assumption that lockdown restrictions are not reintroduced in the future.
Last year when restrictions were initially eased, infection rates quickly surged. If this were to repeat itself, pubs will likely once again have to close their doors. Needless to say, this would be bad news for Marston’s and its share price.
The bottom line
As the vaccine rollout continues and lockdown restrictions are lifted, the Marston’s share price looks like it has quite a lot of room for growth as it completes its recovery and beyond. At least, that’s what I think. Even after taking risks surrounding Covid-19 into account, I would consider adding this business to my long-term portfolio.
