Investors could be overlooking value at Costa Coffee to the tune of £248m according to Davy Research analyst Joseph Quinn.

Costa owner Whitbread (WTB) plans to demerge the coffee chain from its Premier Inn operations within the next two years.

Quinn says Costa Coffee China could be worth up to £248m, but many investors attribute no value to the business. He argues this value could be better understood by the market following likely disclosures under the spin-off process.

The analyst is confident Costa can become a top player despite main rival Starbucks stepping up its expansion in the country.

China is expected to be a key growth driver for Costa with a target of 1,200 new store openings around shopping centres by 2022 thanks to a buyout of two joint venture partners.

There is substantial room for growth as consumption in China is only 0.4 cups of coffee per capita every year compared to 300 in the US. (LMJ)

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