Broker snap: Whitbread upgraded after strong sales

15th Dec 2010 12:14

Nomura has raised its earnings forecast for leisure group Whitbread by 5% as the broker expects its positive operating momentum to continue.The hotel and restaurant owner reported a 9% increase in revenue per available room (revpar) at its Premier Inn chain, compared with the broker's 7% forecast, and Costa Coffee like-for-like (LFL) sales grew 11%, above the 3% estimated. These two businesses account for 85% of the group's earnings before interest and tax.However Pub Restaurant (LFL) sales growth was just 1.5%, below Nomura's 3% forecast, as unusually poor weather affected sales. Analyst Simon Larkin notes that this was a good quarter overall."We believe Whitbread continues to offer attractive double-digit growth at a reasonable valuation and with a conservative balance sheet that is freehold asset rich," says Larkin.The Japanese broker upped its target price to 2,180p and confirmed its 'buy' rating.