WHITBREAD’S SHARES (WTB.UK) could perk up more than 25% if it executes a sale and leaseback on some of its hotel assets and a spinoff of its Costa Coffee chain.
The stock has lost more than a quarter of its value in the past 12 months, partly because investors worry about the capital-intensive nature of the hotel business. Whitbread hasn’t done a sale and leaseback in three years, but one done now could help it realize the value of its assets.
A spinoff of Costa is only a medium-term possibility. The chain is performing well, and analysts at Credit Suisse project compound annual growth of 14% from this year through 2019—a rate higher than that of Starbucks (SBUX).
At Friday’s close of £38.87 ($55.88), Whitbread trades at 15.6 times estimated 2017 earnings of £2.49 a share. On a sum-of-the-parts basis, the stock could be worth £51.40.