Broker snap: InterContinental to grow in the East

25th Nov 2010 12:11

Nomura says that the long-term growth potential for hotel giant InterContinental Hotels (IHG) lies in the opportunity in emerging markets.IHG expects the size of the Chinese hotel market to more than double from 2.3m to 4.8m rooms by 2020, predicting that it will surpass the size of the US hotel market by 2025.Analyst Simon Larkin's number crunching has projected IHG's managed and franchised earnings before interest and tax (EBIT) in China will grow from $21m in 2010 to over $90m by 2015, and to around $280m by 2020.With margins already strong at 76% in the Middle Eastern market, the broker predicts profit from this geography will grow from $44m in the current year to over $75m by 2015, and $150m by 2020.Nomura says that its EBIT projections for IHG's operations in China and the Middle East could potentially be understated by 45%.The broker is bullish on the sector generally, and reiterated its 'buy' rating and 1,350p target price for IHG.