Whitbread plc (LON:WTB) shares were lifted by an upgrade from Barclays on Friday that is based on the potential for “substantial upside” for the Premier Inn owner “if we get a positive Brexit outcome”.
The bank upped its rating on the shares to ‘overweight’ from ‘equal weight’ and its price target to 4,900p from 4,350p.
READ: Whitbread slides into red as Premier Inn feels UK hotel squeeze
Barclays analysts conceded that the UK political outcome is “fraught with uncertainty” at present, but were moving “to align ourselves with our economists' base case”.
The bank’s economists now expect an orderly Brexit leading to a rebound in business investment of around 3.8% next year, making the UK the fastest growing economy of those of interest to the hotels sector.
Whitbread would then be likely to see a “material recovery” in Premier Inn’s revenues per available room (revpar), the analysts suggested, helped not just by market revpar rebounding but also a reduced underperformance from fewer extensions and greater business mix than its rivals.
Some of this was “partially reflected” in the analysts’ forecasts, with revpar growth pencilled in of 2.5% versus 1% previously, resulting in earnings per share up 5% next year and 10% higher the year after.
“Our upside case (assuming PM Johnson's 'tidal wave of investment') shows 19% further EPS upside and a 6,320p value (before reflecting any additional room growth which may result from a stronger macro).”
Whitbread shares were up more than 2% to 4,283p on Friday morning.