Berenberg tweaks estimates on IHG following unexpected trading update

Analysts at Berenberg took a fresh look at British hospitality giant InterContinental Hotels Group on Monday after the company's most recent quarterly performance came in "a little weaker" than expected.

Berenberg updated its numbers for IHG following the publication of an unexpected trading update from the company in advance of its second-quarter results on 8 August.

The German bank said IHG's most recent quarter had been "a touch weaker" than expected - with a revenue per available room down 72%, compared to the roughly 70% it had been expecting and an expected operating loss of $25m for its owned and leased portfolio, suggesting that the group's margin was also softer than it had been expecting.

However, Berenberg expects IHG's run-rate to improve in the second half but also lowered its expectations for the owned and leased portfolio during the recovery process.

"Pulling the changes together, we take down revenues by 11% in 2020 and by 6% in 2021, with fee revenues down by 10% and 7% respectively. With the changes to owned and leased, we think underlying operating income will fall by 20% in 2020 and by 4% in 2021, with EPS down by 35% and 4% respectively," said Berenberg, which reiterated its 'hold' rating on IHG.

"While the changes to our forecasts lower our expectations for this year, there is no meaningful change to our view on recovery so we leave our price target unchanged at 4,000p."