Broker tips: Inmarsat, Cobham, Whitbread

Inmarsat shares dipped on Friday after Citigroup downgraded the stock to ‘neutral’ from ‘buy’ but retained its £11.50 target price.

It said the company has performed strongly, outperforming the telecoms sector by 19% over the last six months and 37% over the last 12 months.

“We see considerable long term, untapped potential in Aviation but note that commercial availability is still some way off for the European Aviation network,” it noted.

“We see potential for upside to near term capex depending on the company’s launch plans, during a period that previously had been expected to be the investment lull part of the cycle.”

Deutsche Bank downgraded Cobham to ‘sell’ from ‘hold’, noting that after the recent run in the stock, the 265p price target is now 12% below the current share price.

The bank said although US defence budgets have reached inflexion point, post recent M&A Cobham is now less geared into US defence end markets.

Deutsche expects full year 2015 net debt to EBITDA of 2.6x, which though well below covenant 3.5x, leaves Cobham unable to execute M&A for at least two to three years.

Near-term, DB expects no earnings per share growth in 2016, below the growth of the EU defence peers which are all much cheaper on EV/EBIT valuation – a more appropriate metric than price-to-earnings ratio due to balance sheet leverage differences.

It added that exposure to some difficult commercial end markets could create residual forecast risk.

Premier Inn and Costa Coffee owner Whitbread was under pressure after Barclays downgraded the stock to ‘equalweight’ from ‘overweight’ and cut the price target to 5,200p from 5,800p.

The bank pointed to slower UK revenue per available room (RevPAR) growth, deteriorating leading indicators and reduced corporate capex expectations from its economists.

It said that while Whitbread remains a high-quality, long-term growth story with a compelling total shareholder return, its positive view had in part been predicated on its belief that RevPAR growth could beat consensus given the various data points it tracks.

However, Barclays now reckons these indicators may be delivering the opposite message.