Broker snap: Panmure keeps 'sell' rating for Whitbread

10th Sep 2013 10:15

Panmure Gordon has maintained its 'sell' recommendation for Whitbread after a 'resilient' but slightly worse-than-expected second-quarter update from the cafe, restaurant and hotel group on Tuesday.Like-for-like (LFL) sales in the second quarter were up 2.1% on last year, a slowdown from the 3.1% growth in the first three months of the year and below Panmure's 2.5% prediction.Costa LFL sales growth decelerated sharply from 8% to just 3% during the period which the broker pointed out was a reflection of the shift in weather patterns over the first half. Restaurant LFLs meanwhile fell by 0.2% which it labelled as a "disappointing performance".However, Panmure said that the hotel performance was "of most interest" in the second quarter with revenue per available room (RevPAR) growth in UK regions underperforming the peer group with 2.5% growth (sector: 6.4%). The broker said that Whitbread, which owns the Holiday Inn chain, was affected by the first signs of a resurgence at rival firm Travelodge.Given that Whitbread said it is on track with its annual plan, Panmure said it sees no change to full-year consensus estimates on the back of this update. "Our forecast is modestly below consensus at £383m profit before tax (162.3p earnings per share). We have a more pessimistic view on RevPAR growth than the market, assuming just 1% RevPAR growth at Premier Inn."The broker said that even on its below-consensus estimates, the stock trades at 18.7 times prospective earnings (for the year ending February 2014) "which is too high in our view". Panmure explained that Whitbread's lofty valuation does not reflect its expected compound annual growth rate in earnings per share of just 7.4% over the next three years.A 2,644p target price for the stock was maintained, implying around 18% potential downside from Monday's closing price of 3,216p. The shares were down 2.67% and 3,130p by 10:26 on Tuesday.BC