BofA restarts IHG at 'buy', says valuation discount 'unjustified'
Analysts at Bank of America restarted coverage of Intercontinental Hotels Group at 'buy' with a 7,200.0p target price, arguing that the shares' valuation discount versus peers was "unjustified".
In a research note, they said the shares' were trading on an enterprise value-to-earnings before interest, taxes, depreciation and amortisation multiple that was at a discount of 14%.
Aside from being wider than had historically been the case, it was unjustified given the company's return on invested capital of over 30%, estimated earnings growth between 2023-27 of 11% and potential for cash returns.
Indeed, they saw scope for IHG to return around 26% of its market value in dividends and share buybacks thanks to its strong cash flow.
They also judged that concerns around its system growth were "overblown", anticipating that it would prove sustainable amid resilient demand for travel.