Broker snap: Modest increase to estimates at Intercontinental Hotels

11th May 2011 11:51

UBS makes modest upwards revisions to its forecasts for InterContinental Hotels after the Holiday Inn owner's first quarter earnings figures came in ahead of expectations. However, the broker keeps its 'sell' rating, highlighting just mid-single digit growth in RevPAR (revenue per available room, a key metric for the hotel sector), and only a 1% increase in room growth during 2011."In 2012 we expect 3% room growth and 5% in 2013. This higher room growth comes with higher investment," the broker said.First quarter earnings before interest and tax (EBIT) exceeded the broker's estimates by some $14m. Nevertheless, 2011 EBIT forecasts are raised by a lesser $8m due to higher-than-expected costs in the Middle East, Japan and New Zealand, and some reversal of cost benefits from the first quarter.While a 'sell' is retained, UBS raises its target price from 1,050p to 1,080p.---BC