Deutsche Bank lowers target price on Whitbread following CMD

(Sharecast News) - Deutsche Bank lowered its target price on hospitality group Whitbread from 2,815p to 2,530p on Wednesday as it attempted to "distill the impressively detailed" capital markets day into analysing the targeted £165m pre-tax profit uplift and the firm's revenue/cost guidance. Deutsche bank stated that strategically, Whitbread's commitment to "an investment-grade b/s meant" that trading as an operating company/property company was ruled out, but also noted that the board of the Premier Inn owner "remains convinced" of the logic of continuing to invest in Germany.

"This brings the investment case back to RevPAR and returns in our view. In short, WTB will add c.10k net new rooms in the UK (expanding the estate by 11%) and 6.5k (55%) in Germany. Part funding the former with non-core pub disposals and reaching maturity in Germany would give a c.500bp ROCE boost," said DB, which kept its 'hold' rating on the stock.

"At the group level, the targeted £165m uplift is a 6% CAGR in PBT. Additionally, WTB aims to generate £2bn in shareholder returns, of which we estimate £160m will fund annual dividends, amounting to a 4% yield at the current share price and the residual could amount to £240m pa (6%) in share buybacks."



Reporting by Iain Gilbert at Sharecast.com