Whitbread PLC's (LSE:WTB) shares have climbed nearly 30% since April, but Citi still sees further upside, pointing to solid growth prospects in both the UK and Germany and a valuation that remains undemanding.
The broker argues that balance sheet strength gives Whitbread plenty of scope to expand beyond its core UK market. Around 30% of Premier Inn’s UK pipeline now comes from converting redundant office buildings into hotels, a strategy that reduces build costs and speeds up openings.
In Germany, a market long seen as challenging, Citi highlights an “inflexion” in the second-quarter development pipeline, suggesting momentum is finally building.
Trading conditions are also proving more predictable. Revenue per available room (RevPAR), a key industry measure that combines occupancy and room rates, is no longer being distorted by unusual factors such as concert tours or the weather.
With international travel patterns back to normal, Citi expects Whitbread to deliver about 2% annual RevPAR growth over time, driven mainly by the broader economy and supported by a very modest 0.5% increase in overall UK hotel supply.
With forecast earnings per share growth of around 10% and shares still trading at a discount to both the company’s historical multiples and the wider market, Citi reiterated its 'buy' recommendation.
The shares rose 1.4% to 3,149p.