Leading sector analyst Geof Collyer has said Whitbread would generate the greatest value over the next three to five years by not demerging Costa Coffee, saying the business compares favourably with rival Starbucks. The question of a possible demerger was raised again at Whitbread’s full year results yesterday, when chief executive Andy Harrison dismissed such a prospect as “erroneous” and said he was “concentrating 100%” on growing the coffee business. Collyer, of Deutsche Bank, compared the status of Costa to that of Stabucks, which reported its Q2 results yesterday. Collyer that although average sales per store are c.60% higher at Starbucks, Costa makes three times as much profit. “Whitbread expects to open 100 stores in China this year (+64%). Whitbread sees significant potential in China, where it is going head to head with Starbucks. We believe that in such a big market that there is enough room for both, but it looks like Costa’s trajectory is ahead of its major US rival, albeit from a lower base.” He estimates that Costa will at least match its rival’s seventh consecutive quarter of 20% sales growth in China. Collyer also pointed to Whitbread’s estimate that Costa is bigger in nine of the 16 countries where it competes with Starbucks. Collyer said: “We see the greatest value creation would be achieved over the next 3-5 years by retaining Costa within the Whitbread family, not demerging. “Last year, Whitbread’s new milestones were established for Costa to make £100m of EBITA in FY’16E. We are already looking for 24% more than that, following yesterday’s upgrade, and we still believe that our Costa forecasts are one the conservative side, with China a big potential positive swing factor. “By the end of the current financial year, Costa should have hit 75% of last year’s 350 store target for China, which could be signficantly exceeded if the 100 new stores this year is repeated over the following three years.”