Bill1703
28 Apr 2017
Re: Finals "You also have to consider the earnings growth rates which are wide apart. ULVR ... earnings are expected to grow at double digit rates (18% for this year) giving it a PEG factor (ok these can be speculative in time) of 1.2... Whitbread on a P/E of 16 with an earnings growth at 5% and you have a PEG factor of some 3.5 -- which can be viewed as pretty pricey."Well, Games, I did say that in the near-term, ULVR earnings growth will trump WTB. But for how long? Consider the last 5 years of reporting - which would you think has done better? WTB EPS (underlying, like-for-like) CAGR of 13.0% vs ULVR at 5.2%... not even close! Talk about growth rates being "wide apart"...."Granted this is only one way to value a company, but often it can be a good leading indicator. If it were the only way, you could expect a lower price for WTB and higher price for ULVR."Okay, I grant you, it's all about the future, not past history. I don't mind a bit of a PEG ratio... though I don't think you can use it with any reliability over only 1 year, as it may prove an exceptional result entirely unrepresentative of the sustainable trend. Now, on a medium term view, I would still expect ULVR to do better, but by how much? Particularly when they've exhausted the margin uplift "opportunity" they have now given themselves... It is slightly cheeky of me to suggest we will go back to WTB £54 vs ULVR £29 any time soon... and I do agree ULVR deserves a premium rating, for all the reasons you and LKH have highlighted. But I do think the current rating disparity is too wide and will "mean revert" - to some extent at least - going forward.Of course, I am more than happy for this to transpire via the WTB rating rising again, rather than that for ULVR falling... though maybe a bit of both is the more likely outturn? ULVR a bit expensive @ £40, and WTB a bit cheap... sounds about right to me!
gamesinvestor
27 Apr 2017
Re: Finals ""P/E ULVR 25x vs WTB 16x""Bill - ULVR does look a little stretched based on the bid euphoria, but there is a modicum of sense in what LK spouts in that ULVR's distribution world network is now massive with 60% of the business now lodged in the areas that are growing richer a little faster than all the western welfare states.You also have to consider the earnings growth rates which are wide apart.Whilst ULVR is on a P/E of (quick check) 22 -- it's earnings are expected to grow at double digit rates (18% for this year) giving it a PEG factor (ok these can be speculative in time) of 1.2.Taking the same view on Whitbread on a P/E of 16 with an earnings growth at 5% and you have a PEG factor of some 3.5 -- which can be viewed as pretty pricey.Granted this is only one way to value a company, but often it can be a good leading indicator.If it were the only way, you could expect a lower price for WTB and higher price for ULVR.Games -- Oh you are going straight to hxll for that one - [link]
Hardboy
26 Apr 2017
Re: Finals ULVR v WTB. We're looking at 2 very different businesses. One's product,. one's service. Ones truly international, the other, mainly UK. Where I think they are similar is they each have some very strong brands; have a great growth record,. and seem to be well run. But I'm with Bill, I think at current prices WTB would be more tempting; and offers greater potential returns. Unilever is nearing the overbought level.
B.V
26 Apr 2017
Re: Finals Wow, It's the clash of the titans!BV
Bill1703
26 Apr 2017
Re: Finals "Well, good luck with Whitbread, m8. I much prefer ULVR at £40 odd rather than WBD at £40 odd mesen. ULVR have been going out foreign for decades and decades ever since the United Africa company, so they understand Johnny Foreigner..."Hmmmmm LKH... as Uncle Warren is wont to warn us, be greedy when others are fearful, and fearful when... you know the rest!P/E ULVR 25x vs WTB 16x; EV/EBITDA ULVR 16x vs WTB 11x; FCF yield ULVR 3.5% vs WTB 5.2% - all for a broadly similar growth profile, in recent history and probably medium-term-forward too (albeit ULVR will likely find a bit more in the short term, for obvious reasons). Admittedly the ULVR divi yields a tad more, though with cover well over 2x (both EPS and FCF) vs ULVR 1.3-1.5x, WTB retains the scope to crank it up considerably, should they choose (or need) to. Balance sheets pretty much equally strong / 'optimal', depending on your take on such things. Would you believe, this time 2 years ago, you were paying £54 for WTB but only £29 for ULVR!? Changed days indeed... back then, I'd be right with you, but at £40-choice, for me it's the mother of all switch trades, I'm afraid. Wouldn't take me long to dash off that particular research note, if I was still in the business of scribbling such things (and in the event that I was allowed to issue recommendations on both on ULVR and WTB, not very likely in these regulatorarily-challenged days, sadly...)A smooth cup of Costa and a plush purple suite with Sir Lenny, or a stewed mug of PG and a pot noodle with Sir LK? As I say, a no-brainer... with the conciliatory promise that, when WTB hits £54 again and ULVR is back down at £29, I'll reverse my recommendation!
Simbrad
22 Jun 2016
Beaufort note out this morning on research tree.. "Whitbread delivered resilient progress in the first quarter despite a weaker UK hotel market, particularly in London where RevPAR declined -1.6% for the total market and fell -3.5% for the Midscale and Economy market. While the major extension programme for Premier Inn has diluted its RevPAR due to higher number of rooms, it supported LFL sales and contributed to +2.1% growth, ahead of the consensus analysts’ Q1 estimate of +1.6%. Costa’s performance, on the other hand, was more encouraging as it advanced total sales by +11.5%, with LFL sales up +2.6% (consensus: +1.9%) recovering from the disappointing Q4 FY2015 result of +0.5% LFL growth that the Group blamed on lower footfall and an unusually warm winter. The Group remains on schedule to open 4,000-4,500 new hotel rooms, 230-250 Costa stores worldwide and has increased its target installation of Costa Express machines to at least 1,250 for this year. Although the Group has seen a tougher trading environment recently in China, international system sales (EMEI and Asia) grew by +11.5% to £88.3m. We believe the long term global opportunity for Costa and this remains one of the most exciting parts of the Group going forward. Whitbread’s share price movement in June to date largely replicates the overall FTSE100 performance, in which companies with significant overseas exposure nevertheless have suffered from cautionary sentiment in the face of polling anticipating a BREXIT majority."
Simbrad
21 Jun 2016
Panmure*
Simbrad
21 Jun 2016
"Q1 Trading (March-May) saw weaker than expected trading in Premier Inn hotels with more robust performance in Costa enabling management to reiterate ‘in line/on track’ sentiments. Overall sales growth was 8%, with LFL growth of 1.8% (PGe 2.1%) with 474 new Premier Inns opened and 94 new Costa stores. Room opening targets have been slightly ranged down to 4,000- 4,500 (from 4,500) although Costa stores and machine targets expanded 230- 250 (from 230) and 1,250 machines (1,000). We do not expect forecasts to move materially today (call at 7.45am) although hotel weakness is cause for some caution." Singer note out this morning on Research Tree
