Stock Market News
HSBC downgrades 'past its peak' Whitbread
HSBC analysts have downgraded Whitbread to 'hold', arguing the company's businesses are past their peak and have lost trading momentum.
The 10% rally in Whitbread's shares since 13 April has removed the company's deep discount and made the balance of risk and reward for investors more sensible, the analysts said. They reduced their rating to 'hold' from 'buy' and maintained their £48 price target, leaving room for a further 14% gain.
Whitbread's shares rose after Elliott Advisers emerged on 16 April as a holder of more than 5% of the shares, mainly through derivatives. The activist investor reportedly wants Whitbread to break itself up by demerging Costa, its coffee shop business, from Premier Inn, its budget hotel chain.
The HSBC analysts cast doubt on reports that a break-up could unlock £3bn of value for investors. There is only about £1bn of unrealised value in Premier Inn, they said in a note to clients on Wednesday.
After years of booming business, Costa faces fierce competition from direct rivals such as Starbucks and Caffe Nero, budget chains including Greggs and premium cafes in cities. Trading is weak and there are not enough cost savings in the business to cover investment and higher staff and commodity costs, the analysts said.
Premier Inn, Whitbread's biggest business, is a good asset but relies on a London market that is cooling and bulging with stiff competition, they added.
"With an uncertain UK macro outlook, persistent weakness in London and aggressive roll-out from its closest peer, Travelodge, we think [Premier Inn] is also past its peak market positioning," the analysts wrote. "We believe that the fundamentals of [Whitbread's] business have weakened and the trading momentum is negative."
The 10% rally in Whitbread's shares since 13 April has removed the company's deep discount and made the balance of risk and reward for investors more sensible, the analysts said. They reduced their rating to 'hold' from 'buy' and maintained their £48 price target, leaving room for a further 14% gain.
Whitbread's shares rose after Elliott Advisers emerged on 16 April as a holder of more than 5% of the shares, mainly through derivatives. The activist investor reportedly wants Whitbread to break itself up by demerging Costa, its coffee shop business, from Premier Inn, its budget hotel chain.
The HSBC analysts cast doubt on reports that a break-up could unlock £3bn of value for investors. There is only about £1bn of unrealised value in Premier Inn, they said in a note to clients on Wednesday.
After years of booming business, Costa faces fierce competition from direct rivals such as Starbucks and Caffe Nero, budget chains including Greggs and premium cafes in cities. Trading is weak and there are not enough cost savings in the business to cover investment and higher staff and commodity costs, the analysts said.
Premier Inn, Whitbread's biggest business, is a good asset but relies on a London market that is cooling and bulging with stiff competition, they added.
"With an uncertain UK macro outlook, persistent weakness in London and aggressive roll-out from its closest peer, Travelodge, we think [Premier Inn] is also past its peak market positioning," the analysts wrote. "We believe that the fundamentals of [Whitbread's] business have weakened and the trading momentum is negative."
Related share prices |
---|
Whitbread (WTB) share price |
Stock News headlines are gathered from financial news sources around the web. Views and opinions on each item are from their respective authors and website. They are not opinions of LiveCharts.co.uk
Get a free widget for your website with our latest headlines.
You can now add our live prices and new headlines to your website.The news widget features quotes for Oil prices, spot Gold price and Indices plus a choice of news channel for healines.
Top Shares pages
- Share price quotes
- Share charts
- Share watch list
- Company Results Calendar
- Top Large UK Shares
- UK Market Sectors
- Stock market news
- Company news
- Share tips
- A-Z company search
More share features
POPULAR Share Prices
- Royal Mail share price
- Lloyds share price
- HSBC share price
- Barclays share price
- Prudential share price
- Santander share price
- NEXT share price
- Diageo share price
- BP share price
- Vodafone share price
- British Airways
- Centrica share price
- Tesco share price
- Taylor Wimpey Share Price
- National Grid
- GKP Share Price
- Marks and Spencer
- Rolls Royce
- Rio Tinto
- THG Share Price
- Aviva Share Price
- Boil Share price
- Easyjet Share Price
- Genedrive Share Price
- SSE Share Price
- IAG Share Price
- Boohoo share price
- HE1 share price
- AVCT share price
- BOOM share price