My call on these cheap FTSE 100 shares has been right so far. I think there’s more to come!

Back in July, I suggested that shares in then-FTSE 100 broadcaster ITV (LSE: ITV) and Premier Inn owner Whitbread (LSE: WTB) looked too cheap. Since then, they’ve soared 45% and 35% respectively. I suspect there’s more to come, which makes me happy as I’m an ITV shareholder.

Back in business

The fact that ITV plummeted in value earlier in the year (and is now in the FTSE 250) wasn’t hard to fathom. Reduced advertising revenue coupled with no filming at its Studios arm motivated investors to run for the exits. Clearly, the recent good news surrounding potential coronavirus vaccines has improved sentiment towards most stocks in general. That includes ITV. 

But it’s more than that. In its most recent update, CEO Carolyn McCall said the broadcaster had seen “encouraging signs” in both of its divisions. Advertising trends were recovering, with year-on-year Q4 numbers likely to be “slightly up“. Most (85%) of its productions had also resumed filming. Elsewhere, Britbox seems to be doing well enough. And the international rollout of the streaming service is “on track“.

Of course, there are still hurdles ahead. The second national lockdown will have undoubtedly hurt revenue and increased costs. And as things stand, there’s no guarantee that restrictions will be lifted on 2 December. With no dividends in sight, ITV is unlikely to be on many income investors’ wishlists.

Even so, I think a lot of this negativity is priced in. Assuming earnings really do recover strongly next year, shares in ITV still trade on a forward P/E of just 9. That could prove a bargain once the £4bn-cap completes its digital transformation. Those perennial takeover rumours could also gather pace if it’s successful in attracting “younger and harder to reach viewers” to its channels.

Growing market share

Like ITV, Whitbread’s shares sank in March. They were hit by travel restrictions that impacted hotel bookings. Also like ITV, it’s benefited from a return of optimism to global markets.

Whitbread has also been boosted by a bullish call from investment banks Goldman Sachs. It thinks the company is well-positioned for a post-pandemic recovery given its focus on the domestic travel market. It has upgraded the stock to a ‘buy’ from a ‘sell’. And the bank also suggested the FTSE 100 member has an opportunity to take market share from competitors.

I’m inclined to agree. Last month, CEO Alison Brittain said the company’s performance since reopening its hotels and restaurants after the first lockdown had been “encouraging“. Importantly, Whitbread was also continuing to trade “ahead of the market“, she said. Yes, it’s the biggest and best-known player in the UK, but that’s still a major achievement. 

Thanks to its £1bn cash call earlier in 2020, the business is likely to weather the ongoing coronavirus storm better than rivals. A stronger balance sheet will also allow it to grow its presence in Germany more quickly. In fact, it announced the capture of “up to 15 more hotels” in the country last month. This brings its total network to almost 70.

Similar to other FTSE 100 stocks, Whitbread’s shares generate no income at present. For capital gains-focused value investors, however, there’s surely more upside ahead. Despite recent positive momentum, the shares are still nearly 30% lower in value than where they were at the start of 2020! I’m keeping an eye on this one.