I still love Whitbread shares and its hotels says Chris Bailey...

Tom Winnifrith Video Shareshow No 15: Stuart Ashman runs what could be a 20 bagger and Lucian Miers on his longs and shorts HERE

Obviously I am a complete sad-o at many levels, one of which includes my love of taking the family to stay at a Premier Inn hotel. Sadly, taking a trip to a different part of the country has been slightly tricky in the last year for obvious reasons but hopefully it is all going to be a bit different in six months time or so. The update today from Premier Inn owner Whitbread plc (WTB) admitted to a few challenges but leaves me optimistic still on the shares, even if their move over the last six months has gone from near twenty quid a share to now over thirty-one quid...

UK Oil & Gas – Obituary (Horse Hill died today and here is why). Peter Brailey writes HERE

Current economy challenges still continue and for the Q3 period (up until the end of November) total sales were down 55.6% from a year ago and unsurprisingly nothing has improved in live trading during December or January either. Back in October here, I saw the H1 losses of more than £150 million (compared to first half profits of more than £450 million a year beforehand for the first half), so you can guess already that full year losses are going to be in the £300-500 million range. However, after a money raising last year, Whitbread is a company with not only £900 million of net cash on its balance sheet but also an ability to borrow a further £1 billion if it wishes, from its banks.

Octagonal interims & another fail for the worst FD on AIM and the worst Nomad in stab City. Read from The Sheriff of AIM HERE

That gives Whitbread time, which is a distinct advantage over some of its hotel peers. Whilst Q3 sales were down year-on-year, its industry share rose from 7% to 11%. Whitbread not only sees this ability to maintain a good product in the UK but also in the German market where it continues to build market position. As the UK has shown over the last ten years, a Premier Inn hotel offering just has a much higher industry perception. If you want to expand anywhere in Europe, then Germany strikes me as a smart place to start. With investing in hotels going up over the next couple of years, profits in Germany are unlikely to follow a similar profile to the UK until 2023. However it makes complete sense to me to go down this Autobahn.

Tom Winnifrith on another Babcock warning HERE

I see Whitbread in 2022 being a £500 million+ profitable business. Put it on a circa x13 multiple and adjust for a bit of net cash and you end up at a fair value of £7.5-8 billion, which would push the shares back up to the level seen, in early 2020 pre virus of around £40 a share. Whilst the world has changed a bit, so has its medium-term market strength. For me this is something those crazy private bidders should be watching closely. I remain a very strong holder and - if you do not own it - I would be suggesting buying the shares here. I'm looking forward to my target summer trip(s) too!

As cash shells go…..this is worth a small punt. Read HERE

Filed under: Whitbread, Tom Winnifrith Video Shareshow, UK Oil & Gas, Octagonal, Babcock

2021-01-15 14:23:10

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