Broker snap: IHG buying opportunity

11th Aug 2010 11:20

The share price slide in the wake of interim results that were ahead of expectations provides an excellent opportunity to buy shares in hotels group InterContinental Hotels Group (IHG), according to Panmure Gordon.The broker has increased its full year earnings per share estimate by 10.1% to 92.6 cents to reflect improved revenue per available room (RevPAR) assumptions, lower interest costs and a marginally lower tax rate."Our RevPar forecast for the Americas has increased from +3.0% to +3.5%," the broker said, adding that the revised rate is still "comfortably below" the forecast from STR, the agency that tracks supply and demand data for the hotel industry in the US, which has North American RevPAR rising 4.3%.Panmure's forecast for RevPAR growth for Europe, Middle East and Africa (EMEA) has been bumped up from 2.0% to 4.0% while the Asia Pacific RevPAR growth rate is increased to +10.0% from +3.5% previously.Forecasts for 2011 have also been revised upwards, and using these new estimates the stock is trading on 16.1 times projected 2011 earnings and is supported by a 2.7% yield.This has prompted the broker to upgrade the stock from "hold" to "buy" and increase its price target to 1235p from 1085p.