Whitbread plc (LON:WTB) shares were lifted by an upgrade from UBS to 'buy' from 'neutral' as it sees the market's predictions of sharp fall in hotel room revenue in the current financial year as "too conservative".
The shares are at "an attractive risk/reward entry point", the analysts said, after around a 15% fall over the past three months to around 4,200p, a valuation that implies the market see the Premier Inn owner's revenue per available room falling 10%, while UBS forecasts the fall will be nearer 3%.
The Swiss bank, which reiterated its target price of 4,850p, added that the group’s freehold property helps underpin the share price and there is “share price optionality” from Whitbread’s German expansion.
While Germany is expected to remain a drag on earnings until the 2022 financial year, UBS analysts believe Whitbread has an opportunity to create “material value” in a country with similar characteristics as the UK, possibly even better.
"At the moment we do not factor the potential positive value into our base case scenario but see German expansion optionality."
Whitbread also has little debt, "which enables [it] to grow in a downturn", and remains the dominant branded UK hotelier with a proven model.