Broker snap: Panmure ups IHG target but keeps a 'hold'

7th Aug 2012 12:53

Panmure Gordon has hiked its target price for Holiday Inn owner InterContinental Hotels from 1,545p to 1,670p after its first-half results, but has retained its 'hold' rating for the stock.First-half figures were in line with expectations with earnings before interest and tax (EBIT) $286m slightly ahead of the consensus forecast of $285m. Revenue per available room (RevPAR) growth was 6.5%."Current trading is slightly weaker with July RevPar growth of 3.8% and we expect full year consensus forecasts of $602m EBIT to remain unchanged," Panmure said.The group has also decided to return $1bn (13.5% of the market capitalisation) to shareholders via a special dividend and share buy-back. As such, the broker's 2013 earnings per share (EPS) estimate has been raised by 8% to around 148 cents, hence the target price increase."Following the return of capital and on a pro forma basis we estimate the stock would trade on a 2013E price-to-earnings ratio of c17x which feels broadly appropriate given signs the macroeconomic environment is starting to impact on hotel trading. We reiterate our 'hold' recommendation."Nevertheless, shares surged on Tuesday, trading 7.71% higher at 1,747p by 12:52.BC