Broker snap: IHG jumps after UBS upgrade to 'buy'

5th Sep 2013 09:16

InterContinental Hotels Group (IHG), the owner of the Crowne Plaza and Holiday Inn franchises, saw shares jump on Thursday morning after UBS upgraded its rating from 'neutral' to 'buy' and added the stock to its 'Most Preferred' list."We re-initiated on IHG in March with a 'neutral' rating given insufficient share upside and certain concerns. We now upgrade to 'buy' given an improvement on a number of our concerns and recent share price weakness," the Swiss bank said in a research report.One of UBS' main concerns was the decline in the pipeline system size, a trend that had been seen since the peak of 2008. This however was alleviated by the 6% increase in the number of rooms in the first half, as reported in IHG's interim report last month.UBS also pointed out that while revenue-per-available-room (RevPAR) growth in China was flat in the first half, IHG outperformed the market by around 6% and the company remains "well positioned to benefit from Chinese market recovery". RevPAR growth in the US meanwhile remains strong, it said.Analysts also highlighted that the company's disposal programme is nearing its end but shareholder returns could continue: "IHG has an impressive history of shareholder returns (including a $350m special dividend announced in August), but with few owned hotels remaining, we are more reliant on operating cash generation. Nevertheless, the company is still in negotiations for the disposal of the Barclay hotel in New York."The bank raised its target price for IHG's shares from 2,050p to 2,200p.The stock was up 2.12% at 1,875p by 10:09 on Thursday.BC