Insider: a £100k bet on this staycation winner

by Graeme Evans from interactive investor |

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With more people likely to be holidaying in the UK this summer, stocks like this could profit.

Whitbread (LSE:WTB) chairman Adam Crozier has spent £100,000 of his own money backing the Premier Inn hotels owner to be at the forefront of a staycation boom this summer.

Aside from supporting Whitbread's £1 billion rights issue in June, last week's purchase is the first time in more than two years that Crozier has bought the FTSE 100 stock.

The move by the former ITV (LSE:ITV) boss at a price of 3,346p gave an immediate boost to investor confidence as shares rose in the final half hour of Wednesday's session to close at 3,366p.

They went on to end the week at their highest level since the end of February, with Whitbread changing hands at 3,418p, as attention turns to today's announcement from Prime Minister Boris Johnson on the roadmap for lifting Covid-19 restrictions.

The ‘re-opening trade’, which has also benefited the likes of Cineworld (LSE:CINE), WH Smith (LSE:SMWH) and Rank Group (LSE:RNK), has been given a further lift in recent days by progress on the immunisation programme as all adults are now set to be offered a vaccine by the end of July.

Whitbread’s own pandemic recovery plan

Whitbread's own planning since January has been for a gradual relaxation of pandemic restrictions from the Spring, with the market recovering over the rest of the year.

It signalled its hopes for a busy year of domestic tourism on 29 January when it announced it will open four new hotels in Scotland, including a “super-sized” Premier Inn in Glasgow city centre and another on Edinburgh's Princes Street.

Analysts believe that Whitbread's mid-market position and focus on UK regions, with 80% of its capacity outside London, leave it well placed to benefit from a recovery in the hospitality sector.

On Thursday, Credit Suisse raised its price target by 500p to 4,000p and placed an 'outperform' recommendation on the stock, which had been trading at 2,100p in late October.

Earlier this month, UBS named Whitbread as its top pick in the European hotels sector based on expectations that the company's budget exposure will lead to it delivering the fastest recovery in the key metric of revenues per available room.

UBS, which also favours Accor over London-listed InterContinental Hotels Group, sees a full recovery for Whitbread by the 2023 financial year.

Whitbread has the added appeal that it shored up its balance sheet through a £1 billion rights issue at the start of the crisis, with its asset-heavy operating structure offering higher leverage opportunities during the recovery phase.

The company's estate includes Beefeater and Brewers Fayre restaurants as well as 800 Premier Inn hotels providing 76,000 rooms in the UK. It also has hotels in Germany, with its open and committed pipeline of sites in the country now at 68.

Current City forecasts for Whitbread's annual results due at the end of April point to pre-tax losses of £647 million based on a 67% slide in revenues to £672 million.

By the following year, the revenues decline on 2020 is expected to be 19% at £1.7 billion for losses of £40 million, although some analysts think a return to the black is still possible.

Rainbow Rare Earths

Global jitters over the rare earth minerals used in electric cars and offshore windfarms contributed to a rapid paper windfall for a director at Rainbow Rare Earths (LSE:RBW) last week.

The wife of non-executive director Alex Lowrie spent £38,400 on the company's shares at a price of 12p on 12 February, but they ended last week worth 68% or £26,080 more following midweek speculation that China is planning to curb its exports of rare earth minerals.

The motivation for China's latest spat with the United States is thought to be the role that rare earths play in defence equipment manufacturing, such as fighter jets.

About 80% of the world's total rare earth resources are mined in China, meaning there's a focus on finding other long-term sources of magnet inputs such as praseodymium-neodymium oxide.

Rainbow has two major projects, with Gakara in western Burundi currently the only African producer of rare earths. Rainbow has also signed a co-development agreement to recover rare earth elements from gypsum stacks at the Phalaborwa project in South Africa.

Earlier this month, Rainbow said recent exploration results reinforced Gakara's significant potential as a 10,000-20,000 tonnes a year concentrate producing operation.

Analysts are predicting demand for magnet rare earth oxides will grow substantially, driven by increasing adoption of green technology and pushing the market into deficit.

Rainbow's share price rise came in a dramatic week for valuations in the commodities sector, with Glencore (LSE:GLEN) and Rio Tinto (LSE:RIO) among FTSE 100 stocks trading as much as 10% higher after strong full-year results were accompanied by a further rise in prices of copper and other metals.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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