Like the investment sad-o that I am, I spent a good while pacing through the one hundred plus slides that formed the Whitbread (WTB) capital markets day presentation. Recall - as I have written up at length before - that the company is now all about the Premier Inn asset after Coca-Cola's largesse in buying Costa Coffee for a pretty sum. Right at the back of the presentation document Whitbread noted that it would return over £2.5 billion of the £3.9 billion proceeds back to investors – which is not a bad slice of the cake. Meanwhile industrial and pension debts/deficits get lowered further...and the company can also easily finance its expansion plan…
All of this will occur over the next six months, and Whitbread remains a growth business. It sees potential for over 110k UK hotel rooms compared to a current base of just over 74k. Meanwhile in Germany its fledgling efforts to date have gone very well and it anticipates the current base of 2k rooms to ultimately expand to 50k. I would rate both growth hopes as credible because of the accrued experience and historic performance of the Premier Inn brand. The Capital Markets Day unsurprisingly lingered long on various pieces of third party research which loved up the brand...but such an assertion feels correct to me in my personal experience. Given a choice I will pay the £10-20 extra for a Premier Inn room compared to harsher rivals such as Travelodge whether travelling for business or pleasure. Meanwhile in Germany the sheer scope for a bunch of 1970s B&B style budget hotels to be squeezed out of the running (as we have seen in the UK and France) is very clear.
Throw in the good economics of all this (teen percentage returns on capital as a hotel starts to mature a couple of years post-build) and the strengthened balance sheet and I would suggest you have a winner. Speculatively, Whitbread may also attract a bid tilt from some of the large specialist hotels names around the world who prefer - like Coca-Cola with Costa - to buy rather than build, so returns might come quickly or not. Bottom line I like the stock and want to keep on holding it here. So from the sublime...to the ludicrous. I have stuck the knife into Restaurant Group (RTN)'s comical plan re. Wagamama before. It overpaid, had to have a money raising to finance AND I am not convinced it really provides any notable synergies. Anyhow - to add to the interesting backdrop mix around this one - news now that the CEO of Restaurant Group, Andy McCue, has left the business citing personal reasons and circumstances.
Now I do not know the truth behind all this – and wish Mr McCue good luck and good health, but it is another curveball on this name which remains totally uninvestable. The shares are down over 10% as I write...too right. A continued short/avoid. In summary, book your Premier Inn room with freedom but maybe have your meal in-house there rather than rocking up to your local Wagamama or Frankie & Benny's.
Filed under: Whitbread, Restaurant Group, Optibiotix, Argo Blockchain, Bearcast, Plus500, Edenville Energy, RBS
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