MainFirst starts 'safe haven' InterContinental Hotels at 'outperform'
Shares in InterContinental Hotels got a boost on Tuesday as MainFirst initiated coverage of the stock at 'outperform' with a 5,600p price target, arguing that it's a safe haven with opportunities for growth acceleration.
MainFirst said that its non-consensus recommendation - 30% of ratings for IHG are 'buy' - relies on the strong fee-based, cash-generative, macro-resilient business model offered by the company.
"This, coupled with its best-in class attributes, are key components vis-à-vis industry threats, ultimately offering a less risky play within our coverage," it said.
It noted that the shares are up 14% year-to-date but trading at an "attractive" 18x FY20E price-to-earnings, versus French rival Accor at 19.5%, while offering a 10% three-year earnings per share compound annual growth rate.
"IHG offers a pure asset-light model with a proven earnings and cash resilience through the cycle. Its best-in-class features, including its portfolio of strong brands, and a leading commercial/technological platform, bring competitive advantages and constitute solid attributes to face industry-specific threats.
"Strategic initiatives recently unveiled pave the way for a progressive acceleration in the development of the portfolio."
MainFirst said the next catalyst for the shares will be IHG's first-quarter trading update on 3 May, which it expects to show a steady quarter-on-quarter revenue per available room trend and positive net system size growth momentum.
At 0940 BST, the shares were up 1.2% at 4,895.50p.