With Whitbread PLC (LON:WTB) shares trading at almost half their level at the start of the year, analysts at Berenberg reckon the shares are worth buying for the value of the hotel group’s property estate.
The German bank’s recommendation on the Premier Inn owner was hiked to ‘buy’ from ‘hold’ as its share price target was lifted to 2,500p from 2,400p in a note to clients on Friday.
Following the shares’ recent weakness, where since late March the price has travelled pretty much sideways, the analysts said they believe “the risk-reward balance on the company has shifted meaningfully”.
The logic is that the shares are now seen to be reflecting a 50% discount on the value of Whitbread’s property.
“We acknowledge that the stock will traditionally trade on the operating performance of the business but we believe that the real estate underpins the value and this level of discount is overdone,” the analyst said.
The share price target change reflects the planned improvement to cash burn indicated by the FTSE 100 group’s recent job cut plans, they added.
Last month, Whitbread said it was axe 6,000 jobs, or 18% of its Premier Inns hotel and Beefeater restaurants staff, even though 98% of its hotels are now open after the UK coronavirus lockdown.
Total group sales fell 75% in the second quarter after a 79% fall in the first, with UK occupancy levels averaging 51% in August and doubts about any potential for a return to the usual spike of business bookings in September and October.