Broker tips: Jimmy Choo, Whitbread, Experian

Liberum downgraded Jimmy Choo to ‘hold’ from ‘buy’ and slashed the price target to 160p from 210p.

“We believe Choo faces increased competition in shoes as other luxury goods companies chase growth,” the broker said.

It said the speed of the luxury slowdown is notable and yet to be discounted in Choo’s consensus forecasts.

Liberum sees Burberry as a bellwether and estimates that sales in China fell from -2% in the second quarter to -11% in the third, and in the US from +8% to -7%.

In view of increased completion in the market, Liberum cut its 2015 EBIT forecast to £32.3m from £40.1m and its EBITDA estimate to £51.6m from £59.5m.

Jefferies downgraded Whitbread to ‘underperform’ from ‘hold’ and cut the price target to 4,100p from 4,300p.
“We argue the rapid growth of the room-sharing economy will negatively affect Whitbread because of its focus on the expansion of Premier Inn in greater London, which we think is the area most at risk.”

The broker said Whitbread is making a big bet on the continued growth of the London budget hotel market, with plans to increase the proportion of rooms within the M25 from around 13% of the total in 2010/11 to around 27% in 2018.

At current levels of profitability, this means the region would generate approximately 40% of divisional EBITDA by then.

Jefferies reckons this strategy puts Whitbread at risk from the rapidly growing room-sharing economy.

Shares in information services company Experian rallied for the second day in a row, after Citigroup lifted its price target on the stock by 9% to 1,340p to reflect higher earnings and the re-rating of the broader business services sector.

The broker said the results brought important validation of its view that Experian can still grow solidly in Brazil despite contracting consumer and business credit issuance and that its management is genuinely committed to shareholder distribution.

It also said the results show the Decision Analytics division has found a margin trough after eight years of decline.

Citi forecasts Experian to return around 6% of market cap to investors in full year 2016 while delivering 4% underlying organic EBITA growth.

It also thinks organic EBITA growth could double to 7-8% in 2018 as organic growth accelerates to around 6% and margin leverage returns.