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30 Jun, 2020 10:47

Berenberg cuts target price on Whitbread ahead of UK restart

whitbread premier

Analysts at Berenberg slashed their target price on hotelier Whitbread from 3,000.0p to 2,400.0p on Tuesday as the group primed itself to reopen following Covid-19 lockdowns and associated travel restrictions.

Berenberg said Whitbread was in "a holding pattern" as it waited for the restart of its UK operations on 4 July, with its hotels in Germany having already reopened.

The German bank revised its numbers on the group taking into account the increased share count following the company's rights issue, its most recent results and also factored in IFRS 16 for the first time.

"Overall, our numbers come down given the higher-than-expected hit to profitability from the deterioration in revenue per available room," said the analysts, which also retained their 'hold' recommendation on the stock.

Berenberg said the valuation was "tough" as it expects Whitbread's foray into Germany to remain loss-making, which left the company's shares looking "expensive" on near-term multiples.

"Our DCF carries a fair value of 2,400p while, if we assume a 40% discount to our pre-Covid valuations for the real estate, invested capital in Germany and the Premier Inn brand, then this also implies a fair value of 2,400p," it said.

However, Berenberg also noted that Whitbread's main competitor Travelodge was "materially weakened", meaning the firm's recent improvements in its offering would be put on a slower trajectory, if not halted completely.

"This will give Whitbread the opportunity to reinforce its market-leading position."

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Pilling and Co Stockbrokers Ltd. is not responsible for the content or accuracy of third party news articles and we may not share the views of the author.

We provide third party news for your convenience and information only and make no representation or endorsement whatsoever and hereby exclude all liability for any loss or damage that may be incurred by you as a result of your access or use. Please note that third party content may be subject to terms and conditions imposed by the third party owner of that content.