Investec upgrades Whitbread, hikes target price after strong Q1

17th Jun 2014 09:56

Investec has upgraded its rating for Costa and Premier Inn owner Whitbread from 'sell' to 'hold' after a strong first-quarter update from the leisure group that beat forecasts.The broker has hiked its target price for the stock substantially from 2,000p to 4,100p.Investec said Whitbread delivered a "marginal outperformance across all divisions", with group like-for-like sales up 6.9% in the first three months of the fiscal year, compared with its 6% estimate.The broker said that a 'sell' stance is no longer appropriate given the strength of underlying growth in the UK.However, it said it still has "reservations" about: the lack of international hotel growth; the possibility of diminishing hotel returns due to an aggressive four-year roll-out programme; and a "paltry" dividend yield that looks set to remain low."A premium rating and key risks around incremental hotel returns dilution preclude a more positive stance, although the strength of trading across its UK brands leads us to remove Whitbread from our 'sell' list."The stock was 2.8% higher at 4,286p by 10:10.BC