Urgent Trade Alert: SELL this pub stock

22nd February 2021 | Sam Volkering

Today Mitchells & Butlers (LSE:MAB) announced it was raising a bunch of cash as it had fully drawn on its facilities and was facing somewhat of a liquidity crisis with only £113 million in cash as at 16 January 2021… over a month ago.

The company has a four-week cash burn of up to £35 million and its debt servicing is due 15 March, which is £51 million. In other words, come 15 March in absence of more funds coming in, it’ll probably be down to about £10 million in cash.

This has also reached a point where the company has even had to delay pension payments.

I don’t like it.

I expected that pub companies would be forced to tap extra capital where and how they could. What I wasn’t expecting was to go so far as to delay pension payments that are obligations that should never be shut off.

There’s just a lot about this current raise for funds, the pension payments delay, all of it, that just smells funny. It smells like things could turn a lot worse for Mitchells & Butlers before getting better.

Seeing as we’re on about a 50% gain from our initial recommendation, I think it’s safest to take profits here and exit the stock.

Sure, it could get through this, get the cash, end up paying back the pension payments, and then continue higher.

Or it could be on the verge of selling assets, clipping the business right back and who knows, even bankruptcy.

The point is, right now I’m sufficiently worried that my view is take the profit and err on the side of caution.

Action to take: SELL Mitchells & Butlers (LSE:MAB)

Regards,

Sam Volkering
Editor, Frontier Tech Investor

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