Sunday share tips: Whitbread, Caretech

The Sunday Times's Peter Evans told readers to 'buy' shares of Whitbread as the hotel and restaurant operator prepares to reopen its establishments, but conceded that a second lockdown would be "disastrous".

Like other companies staring into the Covid-19 abyss, Whitbread saw sales plunge by 99% over the first seven weeks of the lockdown; hence the decision to furlough 27,000 workers.

Nonetheless, as promised by its boss, Alison Brittain, when the company went cap in hand to investors in May for £1bn, the company may now be able to start deploying its 'war chest' to fund future growth.

Its closest rival, Travelodge, is in the midst of a company voluntary arrangement.

More generally, analysts at Numis believe Whitbread could increase its market share from 11% to 14% by "cherry-picking assets from others".

Analysts also see growth in Germany, where Whitbread has 19 hotels, as a big opportunity.

Even so, Peel Hunt is anticipating an adjusted loss before tax of £270m for the year ending in February, on the back of a 40% drop in sales to £1.2bn.

Finally, Brittain has shown scant interest in returning to Lloyds, which is now looking for a chief executive officer.

"While she’s there, it looks in good shape. Buy."

Caretech shares have recovered from the lows seen during the Covid-19 lockdown, but they have further to run, said the Mail on Sunday's Midas column.

The company, which looks after 4,500 people aged five to 45 runs 500 dedicated care homes.

Yet unlike those for older people it didn't register a single death throughout the epidemic.

Listed on AIM in 2005, the company has a track-record of looking after its 10,000 staff and has posted annual profit and sales growth of over 20% each year since floating.

In parallel, the dividend has also been hiked each since, albeit since 2007, and analysts anticipate another hike this year.

And with the social care market valued at £15bn and Caretech's market share standing at just 5%, there continues to be ample room for the firm to grow.

Furthermore, local authorities are increasingly interested in outsourcing social care to the private sector.

There are also plans for growth overseas.

"Caretech shares were more than £5 earlier this year before plummeting to little more than £3 in the dark days of March," said Midas.

"They have recovered since then but, at £4.27, there is still plenty of long-term potential – and an impressive dividend-paying record, too. Buy."