Peel Hunt has started coverage of Premier Inn owner Whitbread plc (LON:WTB) with a ‘buy’ based on its growth strategy and the potential offered by expansion in Germany.
The City broker, which set a target price of 4,800p on the FTSE 100-listed firm, forecasts it reporting 69% earnings per share growth over the next four years, driven by 23% capacity growth to 101,000 rooms from the current 77,000.
READ: Whitbread slides into red as Premier Inn feels UK hotel squeeze
By the end of next year, Premier Inn will have opened in 20 locations in Germany, where there is potential to build a network as large as the UK, according to Peel Hunt's analysts.
Another attractive feature is the £5bn of freeholds the group hold, the analysts added, with management maximising it's asset value through site expansion, site disposal and selective sale and leasebacks, showing the potential for capital returns.
“The UK market in general, and travel & leisure, in particular, has seen multiple bidders prepared to pay up for valuable assets whether real estate, brand or knowhow,” the Peel Hunt analysts said in a note to clients.
“Whitbread has considerable value locked up in each of these and, in our view, is vulnerable to a bidder willing and able rapidly to realise the value in the freehold real estate value,” they added.
Whitbread shares were trading at 4,149p on late Monday morning.