Whither Whitbread?

[UncleEbenezer]

TMF veterans will recollect when I called WTB as a GARP pick. The context was a David Kuo interview of a professional GARP fund manager, who had mentioned eight GARP candidates, so I felt thoroughly smug when my pick substantially outperformed the best of her picks (Compass Group) in each of the next three years.

That was then. More recently it's drifted since the growth kind-of overshot. Then they sold Costa, and are returning cash to shareholders through a buyback. We'll have a smaller company, whose main brand is Premier Inns.

Today they've posted about it at https://www.investegate.co.uk/article.a ... 330018206P . The future is further expansion of Premier Inns, and Germany features prominently.

Which leads me to wonder: how will they fare in Germany? In my (admittedly limited) experience, German hotels are historically much better than British ones, both in quality and value. Whereas Premier Inns fill a badly-needed gap in the UK market, I don't see that any such gap exists in Germany. Can Germany be an engine of further growth, or is this likely to be a much lesser opportunity?

And their niche in the UK is becoming more crowded, as other chains provide a comparable experience at a similar price point. Can they continue to take market share when they have smaller but up-and-coming rivals?

[scrumpyjack]

Yes having bought a large holding when they were 750p, I too am feeling rather smug and much relieved the cash return is going to be by tender so I won't be forced into an expensive tax event.

They seem to think their hotel business is very scaleable here and in Germany and for the moment I will give them the benefit of the doubt and stay holding. Also I think there is a very reasonable chance of a bid in the next year or so, after the tender buyback, as their asset heavy balance sheet must be rather attractive to the big asset light hotel operators.

[westmoreland]

now they've sold costa, it's now a solid, dependable business that earns decent returns on capital (between 12-13%).

the pub business is suffering from structural threats, and earns low returns.

at the right price it is an interesting investment. i don't think it's trading at a price at the moment that offers good returns going forward.

[Alaric]

They have announced a tender offer to buy back shares.

https://www.whitbread.co.uk/investors/return-of-capital

I have a substantial capital gain, but no tax worries as it's in an ISA.

The dividend yield is now on the low side, not helped by a recent small cut.

[scrumpyjack]

I will keep my holding and not sell in the tender. I would not be surprised if there was a bid in due course or the board gets pushed into a capital light policy as advocated by the US activist shareholders and successfully adopted by other hotel chains. They will all be waiting for the tender to be completed, and the number of shares in issue to be cut by 20% or so, before acting.