Broker snap: Investec stays bearish about Whitbread

23rd Oct 2012 10:27

Investec has retained its bearish view of Costa and Premier Inn owner Whitbread after first-half results missed forecasts and a disappointing outlook for the remainder of the year.The broker has maintained its 'sell' rating and 1,650p target price for the shares."Whitbread's H1 was marginally behind our estimates and there is no impetus from the trading outlook statement to warrant a FY13E forecast increase," said analyst James Hollins.Earnings before interest and tax (EBIT) came in at £204.7m, up 11% year-on-year but behind the broker's £205.8m forecast, while earnings per share of 81.65p missed the 82.13p prediction. Revenue, up 14% at £1.02bn, was in line as it had been pre-reported while the dividend was better than expected.The broker points out that the outlook statement is "muted". Whitbread is guiding to "more moderate" like-for-like revenue in the second half than the first: regional UK hotels are expected to see continued RevPAR (revenue per available room) declines, "settling" is anticipated in London after the Olympics, though Costa is expected to continue to perform well."The strong H1 top-line performance is unlikely to be replicated in H2 and we retain our bear stance given our negative view on the group's UK Hotels & Restaurants returns and limited international hotel growth opportunities."Costa remains an exciting story, but, for superior long-term group growth and returns, we prefer InterContinental," Hollins said. InterContinental is rated as a 'buy' with a price target of 1,850p.Hollins concluded: "We are leaving forecasts unchanged and the market may take some disappointment from: (1) no FY13E forecast upgrades, (2) an uninspiring trading outlook, and (3) no announcement on a split of Costa away from the lower growth/returns Hotels & Restaurants (although unexpected)."By 10:27, shares were down 1.59% at 2,286p.BC