Derek Pain: Heavyweights could benefit by attracting new investors

Should Whitbread indulge in a little cosmetic surgery – of the corporate variety? I ask this as the shares of the leisure group approach a new peak of 4,000p, and such a heavyweight figure is thought to be something of an impediment when it comes to attracting new investors.

I am not suggesting that City institutions balk at such a high price, but many small players, investing modest amounts, can easily be deterred. Of course fancy priced shares, in strict investor parlance, are no different from an array of much lower valued shares totting up to about the same outlay. However, a shareholder gets many more shares for roughly the same cost and possibly a feeling of better value.

Whitbread, one of the stars of the No Pain, No Gain portfolio, could, in the long term, make itself even more attractive to many if it issued more shares through splitting its existing units, or handing around free shares. Initially, it would make no difference to its stock market capitalisation. For example, a ten for one bonus could bring the price down to, say, nearer 400p. Such action could prompt a degree of small selling as some shareholders decided to take advantage of the lower level and unload some of their stake, but any residue would soon be mopped up.

With its growing Premier Inn budget hotels chain and its booming Costa Coffee division, plus pubs/restaurants, Whitbread has much going for it. It seems well placed to benefit from the country's economic revival and peak profits will almost certainly be achieved in its current year. I am hopeful of even more progress in the next few years.

Mind you, Whitbread is not the only company to feature an upmarket share price. ASOS, the online clothing retailer that in the portfolio's early days I regarded as too expensive at 30p, has hit 7,000p on the junior AIM market. And among the top 100 shares Next is above 6,000p, Reckitt Benckiser is comfortably over 4,000p and there are quite a few stocks near Whitbread's territory.

Another method Whitbread could adopt is to hive off the Costa side. Apart from a stock market floatation or sale, with at least some of the proceeds going to shareholders, it could also hand Costa shares to its own investment army. There have been recurring rumours that the bubbling coffee pot could be poured, but the general feeling is that any possible deal is some years ahead.

Although moves to reduce prices often occur, there is also a tendency to "inflate" share values through consolidations. Findel, a portfolio constituent, adopted such a policy last year and as a result enjoyed a sudden price above 100p instead of a single digit. And taxpayer controlled Royal Bank of Scotland also indulged in such an exercise.

Lloyds Banking, a constituent since last summer, also has a significant taxpayer involvement. The shares have been firm on talk that the Government will again reduce its stake in the coming months, after the success of last year's exercise. There's also another, more intriguing, suggestion.

A growing body of opinion believes the bank, which ran into difficulty when former prime minister Gordon Brown said it should take over deeply troubled rival HBOS during the financial crisis, will in the not too distant future return to the dividend list.

The shares, once top FTSE performers, slumped to near 20p following the HBOS (Halifax/Bank of Scotland) acquisition. They have since clawed their way back to, at the time of writing, around the 84p mark. Obviously once the group is declaring dividends further progress should occur.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Experienced Recruitment Consultant

    £20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

    Recruitment Genius: Collections Agent

    £14000 - £16000 per annum: Recruitment Genius: This company was established in...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

    Day In a Page

    Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

    How Isis profits from destruction of antiquities

    Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
    Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

    'If we lose touch we’ll end up with two decades of the Tories'

    In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
    Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

    The Arab Spring reversed

    Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
    King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

    Academic claims King Arthur was real - and reveals where he lived

    Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
    Who is Oliver Bonas and how has he captured middle-class hearts?

    Who is Oliver Bonas?

    It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
    Earth has 'lost more than half its trees' since humans first started cutting them down

    Axe-wielding Man fells half the world’s trees – leaving us just 422 each

    However, the number of trees may be eight times higher than previously thought
    60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

    60 years of Scalextric

    Model cars are now stuffed with as much tech as real ones
    Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

    Why are we addicted to theme parks?

    Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
    Tourism in Iran: The country will soon be opening up again after years of isolation

    Iran is opening up again to tourists

    After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
    10 best PS4 games

    10 best PS4 games

    Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
    Transfer window: Ten things we learnt

    Ten things we learnt from the transfer window

    Record-breaking spending shows FFP restraint no longer applies
    Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

    ‘Can we really just turn away?’

    Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
    Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

    Nine of Syria and Iraq's 10 world heritage sites are in danger...

    ... and not just because of Isis vandalism
    Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

    Girl on a Plane

    An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
    Why Frederick Forsyth's spying days could spell disaster for today's journalists

    Why Frederick Forsyth's spying days could spell disaster for today's journalists

    The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent