Lupo di mare
24 Oct 2017
Re: Hotels Growth - Good for Premier Inn Oh guys, guys, please don't let this degenerate into a political/EU ping pong debate!
numberbiter
24 Oct 2017
Re: Hotels Growth - Good for Premier Inn Hardboy, don't worry. Moderate Labour MP's are keeping quiet, but once Corbyn is installed as Prime Minister they will ensure he does not go over the top..The Conservative Party never seems to change; they are genuinely the 'nasty' party, but they always elect a relatively moderate and decent leader. May is a decent person who is trying to negotiate a fair Brexit settlement, but the right wingers (Johnson, Davies, Grayling et al) want a hard 'no deal' Brexit. You only had to look at May making a statement in the Commons yesterday saying she had achieved a breakthrough to see those sitting either side of her looking daggers.A !hard' Brexit would be disastrous for the UK, as we are too small to take on the major markets of China and America alone. But the hardliners don't care - they are rich enough to survive and they don't care about the rest of us. If they manage to get rid of May and install a Brexit hardliner as Prime Minister, at the next election Corbyn would be 'home and hosed'.
lotcangorong
24 Oct 2017
Re: Broker views on H1 Beaufort Secs Whitbread (WTB.L)Sell at 3750pTarget Price: 3400p Whitbread PLC (WTB) reported its H1-FY-18 results today which on the surface looked strong, with both revenues and earnings per share (EPS) some 7% ahead, and return on capital reaching 15.4% (15.1%). Underlying figures, such as Costa Coffee's like-for-like sales (LFL's) were concerning however at only +0.1% growth in Q2 Y/Y. Further, WTB stated "no comment" on current trading which implies to us a much worsening situation with respect to WTB's high exposure to UK consumer spending, plus a riskier business due to greater international expansion plans, a strategy which has not profited WTB in the past. We reiterate our Sell recommendation.
gamesinvestor
24 Oct 2017
Directors Don't see much buying here apart from a few coppers from Adam Crozier.Biggest transaction seems to be a sell at £205K value at £38 back in March by Louise Smalley.Games
gamesinvestor
24 Oct 2017
Re: Hotels Growth - Good for Premier Inn "Even if the Tories do a perfect job negotiating Brexit (& I doubt they'll get anywhere close)"They won't HB - they are pretty clueless and haven't got the gumption to state the case and leave -- only then will you get a perfect Brexit solution -- only then will the EU gamesters know they have a serious issue on their hands.We have the wrong people performing the wrong actions in the wrong roles interfacing with the wrong organisation (the EU).What could possibly go wrong?Well I suppose you are spot on with the Corby part - if that happens we may be well advised to review our investment strategies -- to what, I have no idea at the moment apart from investing heavily offshore.Games
Hardboy
24 Oct 2017
Re: Hotels Growth - Good for Premier Inn 2 additional points - 1 already highlighted by the HL post below. Posters have expressed concern about growth prospects for the 2 brands. Just look at the announcement again and read about the potential of the PI brand in Germany, and the Costa brand in China.There have also been valid concerns expressed about Brexit - I think a greater concern is the prospect of Corbyn being PM - how much will minimum wage & corporation tax rise? (That won't just be Whitbread suffering then.) And I think the next Government being Labour is inevitable. Even if the Tories do a perfect job negotiating Brexit (& I doubt they'll get anywhere close) the result & the process gone through will be universally unpopular & they will be out of office. My hope for the UK Government is that somehow the Corbyn/McDonnell leadership is somehow blotted and more moderate leaders replace them.
Bill1703
24 Oct 2017
Re: Hotels Growth - Good for Premier Inn "Costa's problems have been highlighted. I'm not really surprised at the very low profitability of each outlet. Check it out."Looks like a bit more than £26k per outlet for H1... so around £50k on a FY basis. And it probably varies a lot according to different formats (with a large number of franchise stores, etc).But... is that bad, or good, for typically small outlets, Lupo? I really don't know... operating margins still above 11%, even with the well-understood (and external) margin pressures (NLW, post-Brexit raw material prices, etc), and ROCE 40% - looks okay to me!Ultimately, it's an asset-light, short-leasehold model, which allows them to churn in and out of specific sites according to experience - while generating excellent returns on capital. And with all of physical retail, pubs and estate agents in structural decline, there will no be shortage of new sites to set up in - it's a buyer's market, where they can probably get any lease they want. "So they're having to spend loads to keep growing and they must have gone well past the point of maximum benefit from scale."I don't know - is there any such thing as "maximum benefit from scale"? The incremental benefit will decline with overall scale, of course, but it's not as if it's going to start reversing?There must be a point at which both PI and Costa can't grow much more - in the UK anyway. But there is little evidence we are anywhere near that, yet.In the meantime, you have £90m maintenance capex plus £179m "growth" capex for H1, and yet net debt is down materially? They have grown, and properly invested in both brands for some years now - and this is all internally funded growth, with leverage still only moderate (ND/EBITDA 1.6x last 2 FYs). Free cashflow, before "growth" spend, has been running at over 2x dividends (a yield of 5% or so)... so yes, at some point, a decline in overall capex to more mature, steady-state levels suggests pretty decent scope to hike cash returns to shareholders. All being well, of course...
Lupo di mare
24 Oct 2017
Re: Hotels Growth - Good for Premier Inn Here's HL's take:-"20 years ago over 50% of Whitbread revenues came from brewing and pubs. Today, pubs are off the menu (bar those supporting the hotel estate), while brewing is long gone. In their place are more than 2,300 UK coffee shops, and a 70,000 room hotel estate. Quite the transformation.Costa revenues grew from £143m in 2005 to £1.1bn in 2015, compound annual growth of 23% a year, while Premier Inn checked in growth of 12%. However, while more recent performances remains respectable, there's been a notable slowdown in growth.There are several short-term reasons for that, ranging from weakness in the London hotel market to lower city centre footfall hitting Costa's high street shops. New products, including self-service coffee machines and the stripped down 'hub' city centre hotels, may go some way to alleviate those pressures. (Lupo - That "weakness in the London hotel market" surprises me cosidering the drop in sterling as a resut of the BoE reducing interest rates making UK tourism more attractive.)But Whitbread is also a more mature business now, and that has inevitable consequences. There's still room for both brands to grow domestically, with less than 10% market share in key segments such as London hotels, but growth is unlikely to be as rapid as it once was.Like-for-like RevPAR was up 1.8% at Premier Inn overall, but 3.3% in catchments with no Premier Inn capacity growth. Cannibalisation is clearly a problem. Major cost headwinds in the UK business are adding to the pain, and even the group's impressive cost control has failed to keep margins heading in the right direction.Overseas expansion seems a reasonable response. Premier Inn's international expansion has focussed on Germany, although it's still early days. Costa is further down the international road, and already turns a small profit on its overseas operations, with especially positive noises coming out of China.We see no reason why both couldn't sell as well internationally as they do at home, but building international brands from scratch takes time. In the immediate future the challenge will be guiding a more mature UK business through less favourable economic conditionsWhitbread shares were trading on a prospective yield of 2.5% and a price to earnings ratio of 14.6 times (a slight discount to its ten year average). "
Uncle Doug
24 Oct 2017
Re: Hotels Growth - Good for Premier Inn "the problem is that these shares are expensive"I liked the results- profit b4 tax up 20%, net debt reduced, ROCE up and innovation in new coffees and cold drinks. Once the Costa success story is rolled out in China you will see that these shares are cheap not expensive. They were £49 2 years ago and I reckon they will be back there before long. Prem Inns is set for a great year and with a low £ the tourist numbers will keep soaring. The Beefeater and Brewers Fayre businesses are a disappointment however. Return to £40 easy, £45 very possible next year, £50 in a couple of years.
veksi
24 Oct 2017
Re: Hotels Growth - Good for Premier Inn I do not own these shares although I should as I'm in Costa all the time for coffee and even lunch. I will continue this for another decade I suspect.I think these results are excellent but the problem is that these shares are expensive. The meager 2.5% yield does not offer much downside protection.So it would mean a hold rating or add on weakness at best.
macbonzo
24 Oct 2017
Re: Hotels Growth - Good for Premier Inn Any company that has Sterling as it's base currency is not Brexit proof. Sterling is trading 1.12 to the Euro and around 1.31 to the dollar. It is down about 17% since the Brexit vote. The problem is Costa's main commodity is priced in dollars. They cannot pass the cost on to consumers, easily, when house prices are falling and wages are stagnant.
Lupo di mare
24 Oct 2017
Re: Hotels Growth - Good for Premier Inn Meant to add that maybe one day they'll stop expanding, and give a load of cash to shareholders.
Lupo di mare
24 Oct 2017
Re: Hotels Growth - Good for Premier Inn For me, it's probably the amount of capex required that's a turn-off.The like for like isn't inspiring, and I see that LfL occupancy at PI is marginally down. Well it's down to 81.8% from 82.6%; so may be the rise in AirBnB and similar is having an effect?Costa's problems have been highlighted. I'm not really surprised at the very low profitability of each outlet. Check it out.So they're having to spend loads to keep growing and they must have gone well past the point of maximum benefit from scale.Not one that I'd sell, but nor would I buy it.
Bill1703
24 Oct 2017
Broker views on H1 A few snippets... with a modicum of editing from me:MORGAN STANLEY"... Consensus is on PBT of £589m (MSe £605m), so we expect no forecast changes after today. Recent hotel data has been a bit softer, and the Costa Q2 LfL is disappointing, so we expect to trim 1-2% off our FY18 PBT forecast... On our forecasts, the shares trade on a calendarised 2018e P/E of 13.7x and 8.6x EV/, and while they have had a good run into these results, we still think they look good value given its market-leading positions, roll-out story, scope for efficiency gains, levers for improved operational performance, and a significant discount to its sum-of-the-parts."PANMURE GORDON"... valuation is not optically demanding with a PE of 15.7x (FY18) well below the five year average of 17.5x. But WTB was enjoying mid-single-digit LFL growth in Costa and earnings upgrades until 2016, after which the shares have adjusted to a more benign domestic growth trajectory. Internationally, WTB’s recent buy-out of its south China JV partner provides a useful, but slightly underwhelming, valuation marker. The 8.8x transaction multiple implies an equity value of c.£100m for the whole of Costa China (less than 2% of market cap), suggesting International is not yet a significant value driver. On our SOTP Costa is currently valued at 9x FY18 EV/EBITDA vs. Starbucks at 13x..."NUMIS (experienced analyst very good on WTB FWIW)"WTB now trades on a CY18E P/E of 15.0x and a stable FCF yield of 5%. While we see solid rollout potential in both brands, we are concerned that ongoing cost inflation presents downside risk to estimates, with little visibility on the group’s £150m efficiency plan.."BERENBERG"... We remain attracted to the long-term growth prospects for Whitbread, but acknowledge that the potential woes for UK businesses and consumers due to Brexit will make for a bumpy ride. The company’s H1 2018 results released this morning delivered a 3.4% beat in terms of the underlying pre-tax profit (PTP) at £328m, however softer trends in the second quarter are likely to be the focus. We continue to rate Whitbread as a Buy with a £50 price target."
Bill1703
24 Oct 2017
Re: Hotels Growth - Good for Premier Inn "A 20% rise in first half profits and a 5% hike in the dividend results in a 3.5-4% drop in the sp. Just what is it that the market and investors don't like? "I have been through the statement in detail now - all well and good for me. Pretty much all the metrics for hotels/restaurants look very positive, and the margin pressures (and resulting flat profits) at Costa have been well flagged and warned for some time now. Free cash generation is strong - and up - and net debt significantly down. But I am not surprised at the SP move... it reflects the current market mood. Glass half empty, and particularly eager to pick fault, however marginal, in any UK-exposed stock. And the SP is only back where it was a couple of weeks back... I suspect it will continue to cycle up and down within the current range for a while.Sounds like some people (ie. brokers) are focusing on the lower LFL sales at Costa in Q2. For all that overall profits were actually AHEAD of forecasts. It's that old LFL thing again... only one part of the picture, and I've never seen Costa as a LFL story anyway - we will see if NB is proved right, but I suspect we are a LONG way from peak Costa (overall) profitability still. But if you really want to find something negative, you usually can... This market - more paranoid than normal, as we have seen consistently - is desperate to dismiss WTB as a mature consumer cyclical exposed to a UK economy turning down. And therefore happy to sniff at the consistent evidence (here for all to see, once again) of PI comfortably outperforming its market and the secular growth potential that remains for Costa - in overall sales and profits - in both the UK and, particularly, China. But that is fine... it means we only have to pay market-average multiples for this superior story. As I said, I don't see this making significant headway for the time being, but looks as solid as ever for the longer term... I'm in no rush to buy more here, but if I didn't already own it, I would buy it today.
