Broker snap: Investec upgrades IHG to 'buy' after Park Lane disposal

28th Mar 2013 10:46

Investec has upgraded its rating for InterContinental Hotels Group (IHG) from 'hold' to 'buy' and lifted its target price from 2,000p to 2,100p, saying that the disposal of IHG Park Lane increases the chance of cash returns to shareholders.The group announced on Thursday morning that it had sold the Park Lane hotel for £302m with a 60-year management contract that will keep the hotel within the IHG stable (in exchange for annual management fees of £4.0m per annum).It was sold at a 62% premium to book value and earlier than expected, Investec said, which increases the potential for near-term additional cash shareholder returns.Analyst James Hollins said: "We think that the timing and quantum accelerate the likelihood of a further shareholder cash return announcement during FY13E, with a $1.0bn programme (as per that announced at the H1 2012A results in August 2012) increasingly within our sights over the next 6-12 months (we had assumed 12-18 months)."Meanwhile, he said that a possible repeated $500m special dividend or share repurchase would keep leverage at comfortable levels and could be further boosted by the eventual sale of the Barclay hotel in New York.Shares were up 3.53% at 2,021p by 11:14.BC