Whitbread PLC

Whitbread PLC (WTB) is the owner of Premier InnUK’s preferred hotel chain. The company also operates in restaurant brands, Brewers Fayre, Bar +Block, Beefeater and Table Table. The company is having an employee base of 35,000 people serving the needs of over five million customers per month. The company is planning to grow its Premier Inn brand in Germanyand will open more than 30 hotels by 2020/21. Whitbread PLC’s owned Premier Inn is having more than 785 hotels with over 72,000 rooms all across the United Kingdom.

Financial Highlights – FY2019 (£, million)

(Source: Annual Report, Company Website)

For the financial year 2019 ending 28^th February, the company’s reported revenue was up by 2.1 per cent to £2,049 millionfrom £2,007 million in FY2018, driven by the contribution of new hotel additions in the current financial year. The Underlying PBT (profit before tax) was up by 1.2 per cent to £438 million in FY2019from £432 million in FY2018, driven by ongoing efficiency programme and lower underlying net finance costs. The statutory profit for the year (continuing and discontinued) stood at £3,731 million in FY2019against £436 million in FY2018. The reported basic earnings per share (continuing and discontinued) stood at 2,040.8 pencein FY2019against 239.7 pencein FY2018. The return on capital (continuing operations) was robust at 12.2 per cent and had declined marginally due to investment in Germany business and soft hotel demand in the UK. The operating cash flow declined by 7.1 per cent in FY2019 to £814 millionfrom £877 million in FY2018. In FY2019, the company’s capex was up by £2 million to £557 million.

Share Price Performance

Daily Chart as at May-30-19, after the market closed (Source: Thomson Reuters)  

On 30th May 2019, Whitbread PLC shares closed at GBX 4,547.00, down by 0.31 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 5,162.00/GBX 3,869.95. The company's stock beta was 0.91, reflecting slightly lower volatility as compared to the benchmark index. The outstanding market capitalisation was around £7.92 billion with a dividend yield of 2.19 per cent.

Valuation Methodology


Conclusion
The company had shown decent financial performance in the current financial year. There had been an increase in both top-line and bottom-line performance. With the opening of new hotels, the UK accommodation sales had growth by 3.5 per cent. The company’s profitability had improved significantly with the adoption of tight cost control measures and efficiency programme. The company is confident in the growth opportunities in the UK and internationally.
Based on the decent financial performance and supported by the valuation done using the above method, we have given a “Buy” recommendation at the closing price of GBX 4,547 (as on 30th May 2019) with single-digit upside potential based on 16.69x NTM Price/Cash flow (approx.) on FY20E cash flow per share (approx.).
 

easyHotel PLC

easyHotel PLC (EZH) is an owner, operator, franchisor and developer of branded hotels. The company focus on super budget segment of the industry. The company provide comfortable, safe and clean rooms to the customers. The company presently is having 36 hotels with 3,355 rooms under its brand name, out of which 25 are franchised hotels with 2,139 rooms and 11 are owned hotels with 1,216 rooms.

Financial Highlights – H1 FY2019 (£, million)

(Source: Interim Report, Company Website)

For the first half of the financial year 2019 ending 31st March, the company’s reported revenue was up by 52.6 per cent to £7.26 millionfrom £4.76 million in H1 FY2018, driven by the contribution from new hotel openings in Leeds, Sheffield, Barcelona and Ipswich. The total system sales for H1 FY2019 was £20.2 million against £16.1 million in H1 FY2018. The EBITDA (adjusted) for the first half of FY19 stood at £1.46 million versus £0.98 million in H1 FY2018, giving an increase of 48.2 per cent. In H1 FY2019, the company reported a pre-tax loss of £0.12 million against a pre-tax profit of £0.09 million in H1 FY2018.The company’s loss for the period stood at £114,294 in H1 FY2019 against a profit of £67,590 in H1 FY2018. The company reported a basic loss per share of 0.1 pence in H1 FY2019 versus earnings per share of 0.1 pence in H1 FY2018.

Share Price Performance

Daily Chart as at May-30-19, after the market closed (Source: Thomson Reuters)  

On 30th May 2019, easyHotel PLC shares closed at GBX 76.50, same against the previous day closing price. Stock's 52 weeks High and Low is GBX 126.00/GBX 64.00. The outstanding market capitalisation was around £111.82million with a dividend yield of 0.30 per cent.

Valuation Methodology


Conclusion
The company had shown good top-line performance for the first half of the financial year 2019against a challenging market. The company had successfully added 18 hotels in the last two years. The company is focusing well to expand its network in the UK and Europe across tourist destinations. The operations in the UK are well established and the company is focused to replicate same in European Market. The company’s Five new hotels with 517 rooms are due to open during the second half and nine new owned hotels with 1,096 rooms will be opened in a span of coming 24 months. The company operations might be affected by the uncertainty created by Brexit, but with a strong development pipeline, the company will grow its operations.

Based on the decent growth prospects and supported by the valuation done using the above method, we have given a “Speculative Buy” recommendation at the closing price of GBX 76.50 (as on 30th May 2019) with single-digit upside potential based on 6.62x NTM EV/Sales (approx.) on FY19E sales (approx.).
 
*All forecasted figures and Peer information have been taken from Thomson Reuters.

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