Leading analysts have given their views on Whitbread following its Q3 interim management statement yesterday.
Wyn Ellis of Numis and Geof Collyer of Deutsche Bank both raised their Target Prices for Whitbread after it reported a 4.3% rise in like-for-like sales in the 13 weeks to 28 November, while Simon French at Panmure Gordon reiterated his assessment of the company.
Wyn Ellis
Ellis reiterated his Hold recommendation and increased his Target Price from 3,400p to 3,600p.
“The Whitbread 3Q14 trading update is encouraging with strong LFL sales growth at both Premier Inn (+5.4%) and Costa (+4.9%) and a better performance from Restaurants (+1.8%). This is ahead of our forecasts and consensus,” he said.
“Whitbread says that this keeps the company ‘on track to deliver full year results in line with expectations.’ We suspect that there may be some modest upgrades today and the update is sufficiently positive to help maintain momentum for the shares.”
He estimated that Costa has had 46 consecutive quarters of like-for-like revenue growth in the UK, with Q3 like-for-like sales up c4.9%.
“Costa has an Investor Day planned for Thursday 12 December. We expect the tone at the Investor Day to be positive, with a focus on the developing International business, the UK roll-out and Costa Express.”
Geof Collyer
Collyer raised his Target Price from 3,485p to 3,505p.
“At the nine month stage, Whitbread’s divisional performance is ahead in percentage terms of Deutsche Bank’s growth forecast rates for the full year. Total sales are +13.0% vs. DBE for FY’13 of +10.9%. In Q3 and after nine months, each business has delivered growth in total and lfl sales.
“We expect consensus to move up by c.1-2% on this statement. The performance is vs. a tough comp (total sales were +14.3% at the same stage last year). Although we expect top line growth forecasts will be upgraded for FY’15E as well, we expect the group to invest in additional infrastructure to ensure that the “Five Year Milestones” can be achieved.
“This might curtail PBT upgrades for FY’15E but the investment should underwrite a better performance further out. The overall sales achievement is yet another example of Whitbread’s dual track growth platform split between rollout for Costa and Premier Inn and organic growth driven by strong lfl sales. The shares have outperformed by +10% over the past quarter in anticipation of an improving operating performance, so we see the shares consolidating at these higher levels.”
Simon French
French reiterated his Sell recommendation and 2,753p Target Price, implying c21% potential downside. He labelled the IMS “mixed”.
“For the 13 weeks to 28 November, the group has reported 4.3% LFL sales growth compared to our forecast of 2.5%. By division, Premier Inn LFLs +5.4% (consensus: 4.0%, range: 3.1-5.5%) Restaurants LFLs +1.8% (consensus 0.0%, range: 0.0-3.0%) and Costa LFLs +4.9% (consensus: 4.8%, range: 3.5%-6.0%).
“However the group’s RevPar growth continued to trail the competition in London and the UK regions and it has reduced its rooms’ opening guidance by c500 this year with no increase to next year’s. The group comments that it expects FY results in line with expectations. Consensus expectations are for £394m PBT and we expect no change.
“The stock trades on a CY 2014E P/E of 20.3x and an adjusted EV/EBITDAR of 10.9x which is too expensive given the challenges faced by Premier Inn and Costa.”
A further two notes reiterated their Overweight recommendations.
A note from JP Morgan Cazenove said: “Whitbread reported strong trading for the 13 weeks to 28 November 2013.
“Guidance remains unchanged for Costa store and unit rollout but the company now expects to open 3,500 Premier Inn rooms in FY14E versus previously 4,000. Whitbread believes it is ‘on track to deliver full year results in line with expectations’.
“The stock currently trades on a CY14E P/E of 18.6x versus the European Hotels sector on 19.1x and Starbucks on 28.8x. We retain our Overweight recommendation.”
A note from Barclays said: “Whitbread has delivered another very strong trading update. The group’s reported RevPAR was in line with the market data we track, which was +6.8% in the quarter (vs a 1.3% underperformance last quarter). We expect consensus forecasts for this year are likely to increase slightly though management still expects PI margins to be down y/y. Regarding 2014/15 management is keen to highlight the necessary investment behind growth.
“The IMS confirms the strength of the RevPAR recovery that we believe is materialising in the UK (both London and regions now). We believe Whitbread will be a key beneficiary of this recovery and retain our Overweight.”
