Market Report: Whitbread buoyed by Premier Inn hopes

Whitbread rose yesterday as the FTSE 100 swung to its highest level since September 2008, with traders piling in on hopes that the hospitality and leisure group would remain resilient even as the broader sector faced another year of soft revenues.

Results from a Morgan Stanley corporate travel survey suggested that hotel operators are likely to see another year of weak hotel prices in 2010, with revenues per available room (revpar) forecast to fall by 4 per cent in the US and 2 per cent in Europe. Moreover, freebies such as internet access and breakfast are likely to put margins under pressure. Looking ahead, the broker said the industry was moving towards a recovery, but "with occupancy six points below its long term average ... it will take three to four years of economic growth for hotels to recover pricing power".

Whitbread, which owns the Premier Inn budget hotel chain, may buck the trend, however. The group's revpar in the UK has proved to be among the most resilient in the world, Morgan Stanley said, highlighting the fact that "its average hotel rates have barely moved", meaning that unlike its peers "it does not need price increases to get back to peak revpar". It is also cheap, as the "valuation is the lowest of all the hotels on peak, trough and 2010 earnings", the broker added. Its remarks helped Whitbread to rise 14p to 1318p.

Overall, the heavily weighted mining sector supported the FTSE 100, which touched a session high of 5,396.96 before closing at 5,382.67 – up 1.6 per or 86.29 points on the day. The benchmark is now within striking distance of levels last seen before Lehman Brothers went bankrupt on 15 September 2008; it closed at 5,416.7 on 12 September 2008. The mid-cap FTSE 250 index was also strong last night, gaining 1.6 per cent or 149.53 points to close at 9,523.27.

Lonmin, the platinum producer which issued final results yesterday, was the strongest of the blue chips, rising by more than 9 per cent, or 148p, to 1740p, while Xstrata rallied to 1093p, up 7.8 per cent, or 79p. Lonmin was supported by a well-received medium-term outlook, while Xstrata was powered by the price of copper, which rose thanks to the renewed weakness of the US dollar. The Eurasian Natural Resources Corporation rose by 23.5p to 906.5p. News from Japan, where official figures showed a larger-than-expected expansion in third-quarter gross domestic product, also boosted sentiment across the sector.

Similar factors were at play in the oil and gas industry, with stocks such as BG, up 26.5p at 1132p, BP, up 7.2p at 588.3p, and Royal Dutch Shell, up 26.5p at 1883p, gaining ground as oil prices rose on the back of the weak dollar. Explorers and producers also traded higher, with Cairn Energy climbing 52p to 2922p and Tullow Oil advancing 30p to 1270p.

Elsewhere, Aviva closed 4.6p higher to 409.7p after Morgan Stanley upped the stock to "overweight", with a target price raised from 446p to 593p. It said recent changes such as Aviva's successful estate attribution and overhaul of the UK general insurance business were "beginning to pay off". "While some of this has yet to feed through into the numbers, we believe other aspects have been masked from investors by the volatility of markets," the broker added, abandoning its "equal weight" stance.

In the housing sector, the mood was buoyant after Persimmon issued a positive interim management statement, sending its shares up 6.2 per cent, or 28.5p, to 488.6p. Its chief executive Mike Farley said "buyers are back", raising hopes across the sector. The cheer drove Barratt Developments up 4.1 per cent, or 5.8p, to 146p and Bellway up 5.4 per cent, or 42p, to 822p. Bovis Homes was also strong, gaining 15.2p to close at 456p.

Numis offered hopes to investors in Punch Taverns, the pubs group which gained 1.85p to 92.3p after the broker said a recent sales presentation had left it with the impression that while trading conditions remained tough, there were signs of improvement. "This and a strong disposal programme should bring an improvement in like-for-like profits in the new year," the broker said. "Over the medium term, the shares could significantly outperform if [underlying earnings] stabilises and inflation returns."

On the downside, the inter-dealer broker Tullett Prebon continued to trade lower, retreating 4.4 per cent, or 15.2p, to 334.3p as analysts weighed in on last week's interim management statement. Numis reduced its target price for the stock from 476p to 447p, citing the disclosure of the extent of staff losses to BGC, while Panmure Gordon scaled back its target to 400p, from 440p previously.

"We are concerned about capacity gaps left by recent broker departures," Panmure said, maintaining a "hold" stance on the stock.

Further afield, the window film specialist Pentagon Protection saw its shares jump 25 per cent, or 0.12p, to 0.58p after confirming a bid approach from the security group Westminster. Pentagon said the approach, made last week, was pitched at a level below where its shares were trading at the time, and "substantially undervalued" the company. Westminster ended 0.5p lower at 33p last night.

Start your day with The Independent, sign up for daily news emails
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Guru Careers: Graduate Editor / Editorial Assistant

£16 - 20k: Guru Careers: A Graduate Editor / Editorial Assistant is needed to ...

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine