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FTSE lifted higher by Whitbread, BP and Standard Chartered

Discussion in 'Market News' started by Lily, May 4, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
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    Market supported by positive company updates despite dip in mining shares

    Whitbread is benefiting from Britain’s long hours work culture, analysts said after the Costa coffee and Premier Inns business reported a near 12% jump in profits.

    The company’s shares have been under pressure recently on concerns about slowing sales growth at Costa and competition in the budget hotel market from the likes of AirBnB.

    Costa is busily slaking the nation’s never ending thirst for caffeine; think of it as an investment play on the UK’s long hours work culture. Premier Inn is a great product; a clean comfortable room, in a good location at a sensible price. With over 60,000 rooms in the estate, it is the clear market leader in the UK branded budget hotel sector. Costa is omnipresent on UK High Streets and highways, with a rapidly growing overseas presence too. Both businesses have ambitious growth plans over the next four years. The restaurants business plays a supporting role to the hotels, but struggles to inspire in its own right.

    The world around us is shifting, with rising customer expectations, an evolving competitor landscape, rapid technological developments and changing cost structures...

    I have identified three key strategic themes...grow and innovate in our core UK business, focus on our strengths to grow internationally, and build the capability and infrastructure to support long term growth.

    Today’s prelims were much as expected given the early March trading statement. The stage is now clear for new chief executive, Alison Brittain, to deliver her vision of how to achieve 2020 targets and beyond... Ultimately Brittain needs results to move the share price, but we think today represents a welcome fresh expresso shot of energy. We remain buyers in light of the 27% fall in the stock over the last 12 months, excellent underlying free cash flot and strong balance sheet which gives it significant optionality, a strength that Brittain appears to understand.

    The strategic review highlights the structural growth opportunities for both Premier Inn and Costa, but also explicitly highlights challenges including the ‘share any market disruptors might gain’ in the hotel market. Further, Whitbread are strongly reiterating their view that they have no desire to split off any division. Trading numbers are satisfactory and in line with expectations from the 50 week update. We suspect the strategic review might lead to more questions than answers.

    Equity markets have seen a revival of bullishness this morning, maintaining their bounces from yesterday’s one-week lows. Risk appetite would appear to be on the up in contrast to the usual investor side-lining we see ahead of major risk events such as a Fed - and in this case Bank of Japan - update, hopes high of continued accommodative language from the former and more policy easing from the latter. UK sentiment is buoyed by an oil price holding up around recent highs and a surprise first quarter profit from behemoth BP while the US Dow Jones has surged back above 18,000 ahead of results from tech giant Apple tonight.

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