Whitbread and InterContinental hit as JPMorgan turns more cautious
InterContinental Hotels and Premier Inn owner Whitbread were under the cosh on Thursday as JPMorgan Cazenove stuck 'underweight' ratings on shares of both, saying it was turning more cautious on the risk profile for the European hotel sector.
Reasons for the caution include a lack of momentum, high consensus expectations, high multiples, late cycle, decelerating revenue per available room, company-specific concerns, a lack of catalysts and an uncertain macro environment.
JPM cut the rating on IHG down from 'neutral' as it said that recent share outperformance, close to peak valuation, an extended cycle and decelerating industry trends, combined, suggest an unattractive risk-reward profile. The target price was lifted to 4,700p from 4,350p.
JPM reinstated Whitbread at 'underweight' after a period of restriction.
"With the £2bn SBB tender offer completed, most of the value unlocked by the Costa deal has been allocated. Business momentum has significantly deteriorated in the UK since the beginning of the year.
"As a pure UK domestic business, WTB is the most exposed hotelier to the current economic and political UK turmoil," it said. It has a 3,800p price target on the shares.
JPM downgraded French hotel group Accor in the same note, to 'underweight' from 'overweight', saying that concerns about management execution and the capital allocation framework surpass the reasons why it liked the stock, which included its sound business positioning and optionality to unlock value.
At 1615 BST, Whitbread shares were down 2.6% at 4,428p and IHG shares were 2.2% lower 5,053p.