Market Report: Whitbread builds on investor day cheer

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The Independent Online

Whitbread, the hospitality group behind Costa Coffee and the budget hotel chain Premier Inn, stood out as the benchmark FTSE 100 index staged a comeback last night.

The stock strengthened by more than 3 per cent or 45p to 1409p as the bulls, cheered by feedback from the group's investor day, piled in. Seymour Pierce said the presentations, held in London on Thursday, were "impressive" and reflected a company "with confidence and momentum".

Morgan Stanley said the outing left it "more convinced than ever that this is one of the highest quality, fastest growing, yet cheapest quoted hotel companies". "The only disappointment from the day was that there were no profit targets, but given that Whitbread has been consistently beating expectations, the market shouldn't need too much spoon-feeding here," the broker added, reiterating its "overweight" stance.

Barclays Capital also chimed in with some words of support, raising its earnings forecasts for the group by 1, 4, 5 and 8 per cent for 2010, 2011, 2012 and 2013, respectively. "The main reason for our upgrades comes from a more than 20 per cent upgrade to our assumptions for Costa growth, as we capture the upside associated with a faster roll-out of new stores and, more importantly, the maturing effect of current sites," the broker said. "We also assume a faster increase in new room growth for Premier Inn in line with the group's target of 55,000 new rooms in four years." Barclays raised its target price for the stock to 1700p.

Overall, the FTSE 100, recovered up 42.78 points to close at 5,188.52. The FTSE 250 was also on firm footing last night, advancing by 23.52 points to 9,237.3. Sentiment strengthened following the release of the latest reading of US gross deomestic product, with figures showing the world's largest economy expanded at an adjusted annual rate of 5.7 per cent in the final quarter of last year – a sharp pick-up from the 2.2 per cent increase in the preceding quarter. Analysts had pencilled in a 4.7 per cent rise.

Banks were among the biggest beneficiaries of the improved mood, with HSBC rallying by 17.3p to 677.3p and Barclays gaining 5.6p to 270.55p. Standard Chartered closed up 20p at 1452p, and Lloyds Banking Group, rose 0.45p to 51.2p, but Royal Bank of Scotland was 0.27p weaker at 32.3p. RBS was held back as some analysts pointed to concerns about a property lawsuit facing the group's Citizens Bank unit in the US.

In the wider financials sector, the insurers Prudential and Legal and General were under pressure, declining by 10p to 578p and by 0.8p to 75.9p, respectively.

The news from the US aided the mining sector, parts of which were higher as recovery hopes returned to the fore. Commodity-related stocks were also supported by Goldman Sachs, which raised its metals price forecasts, reflecting stronger growth predictions by its economists.

The broker said that Kazakhmys, which ended 7p lower at 1219p following some late weakness, was its top pick because of tight copper markets. "Kazakhmys offers the strongest exposure to high and rising copper prices through to 2014," Goldman added, reiterating its conviction "buy" stance and raising its target price for the stock from 1983p to 2022p.

In the wider sector, Xstrata swung up 27p to 1031.5p as Goldman Sachs raised its target price from 1342p to 1400p, and Rio Tinto rose 45.5p to 3099p. Goldman also increased the target price for Anglo American from 3337p to 3563p, and the shares jumped by 22p to 2322p. Vedanta Resources was also higher, rising 6p to 2427p.

Another on the upside was Tate & Lyle, which advanced by 7.6p to 396.3p after UBS switched its view on the stock from "sell" to "neutral", albeit with a revised 415p target price, compared to 425p previously.

"We continue to argue that it is vital to look through Tate's inherently volatile and difficult to predict earnings stream," the broker said, highlighting the recent run of weakness in the sugar and sweetener producer's share price. "With the stock's enterprise value having fallen to just over six times our 'normalised' Ebitda estimate, we no longer judge it expensive."

Elsewhere, Credit Suisse lifted sentiment around the publishing and conferences group Informa, which closed 12.7p ahead at 330p after the broker initiated coverage with an "outperform" rating. Credit Suisses said that not only was the stock a safe play on the recovery, but it also offered the potential for bid activity. "Informa has been one of the sector's main takeover targets," the broker added, setting a 385p target price on the stock.

Further afield, the property website Rightmove saw its shares rally by more than 5 per cent after striking a deal to use the Google Maps service on its website. The news, which put fears about the prospect of competition from the search engine giant to rest, was accompanied by a positive house price report from the Nationwide, and helped Rightmove rise 27.5p to 528.5p.

The housebuilder Redrow was also firm last night, rising by 1.5p to 131p following the news that house prices had jumped at their fastest pace in five months in January.