Stick with Whitbread on takeover hopes, Canaccord says

30th Apr 2019 10:54

(Sharecast News) - Investors should stick with Whitbread shares despite weak trading because it is financially strong and a potential takeover target, Canaccord Genuity said. Nigel Parson, Canaccord's analyst, reiterated his 'hold' recommendation on Whitbread and left his price target of £51 unchanged after the budget hotel operator warned that economic uncertainty had reduced demand for its hotels.Whitbread sold the Costa coffee chain in January, leaving the owner of Premier Inn with a business focused on its Premier Inn hotels. Parson said that although investors were disappointed by the trading update, the shares should be supported by Whitbread's plan to return £2.5bn of Costa sale proceeds to shareholders.He also said that the valuation was underpinned by about £5bn of freehold assets and a good record of weathering difficult markets. Whitbread could also be bought, he added."We retain our 'hold' recommendation, as we believe [Whitbread] remains vulnerable to takeover by a global hotel player acting in consort with a property fund or private equity," Parson wrote in a note to clients. "Potential buyers could include InterContinental Hotels and Marriott or private equity."Parson said his estimate of a 1% decline in revenue per room this year may be too optimistic. Consensus forecasts for annual profit are likely to decline to a range of £400m to £415m, he added.