Broker tips: InterContinental Hotels, Ophir Energy, Unilever

28th Oct 2013 14:01

InterContinental Hotels Group's shares slumped after Panmure Gordon reiterated a 'hold' rating as the company reported a weaker-than-expected third quarter trading update.The company's third quarter trading was a bit below expectations, these analysts pointed out, with a weak showing for the Americas in September (RevPar up 3.7% and the US at 1.6%)."The culprit was Holiday Inn which was down 0.9% reflecting slower group business. Current trading trends give the group confidence for the rest of the year but we think RevPar expectations may edge back a bit for Q4 in both Americas and Greater China," the broker said."Strengthening sterling works against static valuation metrics with majority of earnings in dollars and share price in £. The company trades on a estimated 2014 price-to-earnings multiple of 18.9 times, adjusted enterprise value/earnings before interest, taxes, depreciation, amortisation and rent [EV/EBITDAR] of 11.3 times and yields 2.6%. We reiterate our hold recommendation."Consensus forecasts are for $660m earnings before interest and tax and Panmure expects these will edge back.Oil exploration group Ophir Energy is moving into a more 'interesting' phase in the opinion of analysts at Credit Suisse, as the appraisal/drilling campaign in the Tanzanian joint-venture with BG Group continues and with drilling at the Mlinzi prospect in the northern part of Tanzania and then, possibly, the Terrace prospect - also in Tanzania - gets underway. The Mlinzi prospect, where drilling may begin from late November/December, is a high-risk/high-impact well that could open up a northern gas hub, the broker explains. As well, now that another rig has been secured the time-line to drill the pre-salt Gabon prospects is much firmer. Ophir's acreage in Gabon is in the northern basin, where the primary reservoir target is at a significantly shallower depth (i.e. better chance that any hydrocarbon present will be in the oil window).Despite all of the above the Swiss broker has moved to mark-to-market foreign exchange (FX) rates, following recent macro changes. As well, it has decided to 'conservatively' take out the risked exploration upside from the Tanzania BG joint-venture, despite the remaining prospectivity. Due to these two factors the price target on the company's shares has been cut to 495p from 550p before. Compensating in part for the above, Credit Suisse has adjusted its other exploration valuations consistent with their global interactive offshore oil model and adopted Ophir's guidance for geological chance of success. They were previously more conservative on both accounts.The recommendation has been maintained at 'outperform'.Consumer goods conglomerate Unilever has the means to withstand weaker growth in its markets and increased competition. However, it needs to improve growth in developed markets and it has been a disappointingly long time (nearly two years) since the company's last material acquisition, analysts at Panmure Gordon wrote on Monday. Thus, the company's latest trading update showed that the rate of contraction in developed market growth slowed in the third quarter from -1.6% to -0.3%. However, that came despite a surprisingly poor performance in North America, while the rate of expansion in Europe barely edged into positive territory.As regards to emerging markets, growth slowed sharply, from 10.3% in the first half of 2013 to a 5.9% pace in the first quarter, led by a deceleration in Asia/Africa. The expansion of sales in Latin America was hit by SAP changes and an on-going product recall. Furthermore, while the broker is confident that sales growth will tick-up in the fourth quarter, earnings per share growth this year and next will be held back by the currency drag, it goes on to explain. For all of the above reasons they have decided to lower their price target on the shares to 2,625p (from 2,800p) and move to a 'hold' recommendation, from 'buy'. AB