InterContinental share price: UBS lifts rating on Holiday Inn owner

Written by: Tsveta van Son
March 11, 2020

UBS is no longer bearish on InterContinental Hotels Group (LON:IHG), having lifted its rating on the stock following a decline in the shares. The move marks a boost for the Holiday Inn and Crowne Plaza owner after earlier this week, Morgan Stanley lowered its rating on the stock, flagging concerns over US business confidence.

InterContinental’s share price, however, has fallen deep into the red in today’s session, having given up 1.61 percent to 4,222.00p as of 13:41 GMT. The shares are underperforming the broader London market, with the benchmark FTSE 100 index currently standing 0.13 percent lower at 6,897.93 points. The group’s shares are down by about 10 percent over the past year, as compared with about an 11-percent fall in the Footsie.

UBS lifts rating on IHG

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UBS lifted its rating on InterContinental from ‘sell’ to ‘neutral’ and hiked its price target on the shares from 4,000p to 4,275p. Proactive Investors quoted the analysts as commenting that they had previously rated the Holiday Inn owner as a sell since they “felt the trading multiples did not reflect our concerns about a slowing US RevPAR (revenue per available room) cycle and challenges on the distribution front”.

“During the course of 2018 we saw US RevPAR slow and the trading multiple of IHG contract. We now feel the trading multiple of the shares more accurately reflects our concerns,” the broker continued, adding that “with the acceleration of pipeline delivery, we estimate that Group RevPAR would need to fall by more than 3.5 percent before 2019e EBIT could fall below our 2018e EBIT forecast”.

Analysts trim net income forecast

UBS, however, lowered its net income forecast down by 5.5 percent in 2019 and 2020, mainly due to the increased interest related to a recent bond issuance and the future payment of the group’s special dividend.

As of 13:59 GMT, Thursday, 10 January, InterContinental Hotels Group PLC share price is 4,216.00p.