Broker snap: Credit Suisse upgrades IHG to outperform

2nd May 2012 15:28

Credit Suisse has raised its rating for Crowne Plaza and Holiday Inn owner InterContinental Hotels (IHG) from neutral to outperform 'given sustained trading momentum and as the balance sheet is put to work.'"We view IHG as the highest quality business in the European hotel sector given its high and rising returns (2012E return on invested capital of 25%) driven by a capital-light predominantly managed and franchised model," a research note said this morning.The broker highlights IHG's "attractive" geographic mix, with 84% of its earnings before interest and tax (expected for the 2012 year) generated in the US and emerging markets. It is the sustained growth momentum in these regions that has pushed the broker's 2012 earnings per share (EPS) forecasts up by 7%.Furthermore, Credit Suisse says that RevPAR (revenue per available room) growth forecasts in 2013 and beyond are conservative. The broker's target price for the stock has been lifted from 1,521p to 1,692p.IHG was trading 2.2% higher at 1,517p before the close of trade on Wednesday.BC