Leading sector analyst Simon French has increased his Target Price for Whitbread, the leisure group, but reiterated his Hold recommendation and said he’s “cautious” about current trading.
French, of Panmure Gordon, highlighted that Whitbread, which reports its pre-close interim management statement on Tuesday (26 February), is on track to deliver full-year results in-line with expectations.
“On our forecasts the stock trades on a CY 2013E P/E of 17.0x and an adjusted EV/EBITDAR of 9.7x whilst yielding 2.4%. We increase our Target Price from 1994p to 2500p valuing Whitbread Hotels & Restaurants on 9.0x FY 2014E EV/EBITDA and Costa on 10.5x FY 2014E EV/EBITDA. We remain cautious on current trading and the increasingly competitive environment for budget hotels and hence reiterate our Hold recommendation.”
In terms of his outlook by sector, French said: “Hotel industry data indicated that December Revpar was fairly robust (+1.0% in the UK according to TRI) and whilst we expect January to have been impacted by the weather, trading should have been stronger in February. The comparative is a relatively soft -0.9% and as such we expect positive LFL sales growth at Premier Inn for the 11 week trading period.
“In Restaurants the LFL sales comparative is a more demanding 2.2% and December and January data from the Coffer Peach Business Tracker indicates a negative trading performance. February should be stronger as the group laps last year’s snow but we expect only flat LFL sales growth.
“Costa’s current performance is harder to gauge. Momentum has been strong with c7% LFL sales growth in Q3 and YTD but the group faces a reasonably tough comparative of 6.2% and high street retail has been volatile. We anticipate the group will report a slowdown in LFL sales growth to c4% for the current period.”
He added: “For FY 2013E consensus expectations are for £350.5m PBT (149.1p EPS). Our forecast of £349.7m PBT (149.1p EPS) is in line with consensus. We think consensus forecasts for FY 2014E may be slightly on the high side at £392.2m PBT (163.9p EPS) given UK hotel Revpar forecasts; we forecast £374.5m PBT (160.4p EPS).”
