Berenberg cuts target price on Whitbread ahead of UK restart

Berenberg said Whitbread was in "a holding pattern" as it waited for the restart of its UK operations on 4 July, with its hotels in Germany having already reopened.

The German bank revised its numbers on the group taking into account the increased share count following the company's rights issue, its most recent results and also factored in IFRS 16 for the first time.

"Overall, our numbers come down given the higher-than-expected hit to profitability from the deterioration in revenue per available room," said the analysts, which also retained their 'hold' recommendation on the stock.

Berenberg said the valuation was "tough" as it expects Whitbread's foray into Germany to remain loss-making, which left the company's shares looking "expensive" on near-term multiples.

"Our DCF carries a fair value of 2,400p while, if we assume a 40% discount to our pre-Covid valuations for the real estate, invested capital in Germany and the Premier Inn brand, then this also implies a fair value of 2,400p," it said.

However, Berenberg also noted that Whitbread's main competitor Travelodge was "materially weakened", meaning the firm's recent improvements in its offering would be put on a slower trajectory, if not halted completely.

"This will give Whitbread the opportunity to reinforce its market-leading position."