Leading analyst Jamie Rollo at Morgan Stanley has placed JD Wetherspoon amongst his three bottom share picks for 2016, whilst Whitbread are one of his top three.
On JDW, Rollo, who also put forward pub companies having a good year as the NLW boosts consumer spending as one of his possible surprises, said: “Competitive pressures impacting like-for-likes, operating margins in structural decline, pub numbers declining for first time, leverage rising, valuation premium to peers.”
On Whitbread, he said: “(it has) leading positions in structural growth markets, expansion-led growth, conservative like-for-like expectations, Costa digital/food boost, International a free option, SOTP discount.”
He also rates as Mitchells & Butlers.
SSP is also amongst his bottom three picks. Rollo said: “Turnaround story and margin expansion well understood and in forecasts, new contract wins initially margin dilutive, rising capex and JV/associate mix impacting FCF, valuation premium to peers, 16x 2018e P/E on bull case prior peak margins.”
He also rates as Underweight Enterprise Inns.
Amongst his five possible surprises are; the UK enjoying a staycation boost, and England winning the UEFA Euro 2016 football championships.
