Updates

Whitbread

October 2018

Investing in shares may lose you all or some of your money. Past performance is no indication of future performance. Some of the shares recommended here may be small company shares, which can be relatively illiquid and hard to trade and this makes such shares more risky than other investments.

The shares soared £7 after Whitbread announced the sale of its Costa Coffee division to Coca-Cola for £3.9bn, equivalent to 16.4x FY’18 EBITDA or 15.6x FY’19 EBITDA, which is a c. 50% premium to where comparable peers trade according to broker Morgan Stanley. Costa’s closest comparator Starbucks, trades on a 1 year forward EV / EBITDA of 12.9x while the closest in terms of comparable transactions was JAB’s acquisition of Pret a Manger for 15x EBITDA.Whitbread plans to reduce its financial indebtedness and make a contribution to the pension fund but will pay out the balance to shareholders. Morgan Stanley calculates that if Whitbread plans to de-lever to c. 2-2.5x net debt / EBITDA, that would imp ...

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With small companies there is an above average degree of risk compared to buying blue chips. Please be aware that we have not assessed the suitability of any of these investments for you. The newsletter simply states a personal view and diarises the editor’s investment decisions. Please speak to your stockbroker or other qualified individual to ascertain whether any of these companies mentioned would form useful additions to your own portfolios. Past performance is no indication of future success.

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