Credit Suisse cuts IHG to 'neutral'

21st Feb 2014 09:59

Credit Suisse has cut its recommendation for Holiday Inn and Crowne Plaza owner InterContinental Hotels Group (IHG) from 'neutral' to 'underperform' and reduced its target price from 1,980p to 1,810p, saying investors are paying a "peak price for off-peak performance".The bank pointed out that the stock is trading just 4% below its all-time high and trading at a forward price-to-earnings ratio of 23, which is just 8% under its peak valuation levels of 2007.Credit Suisse said that IHG's current operating performance, in terms of revenue per available room, room and fee growth and system delivery, is weaker than history and other peers in the sector. Meanwhile, current levels of capital expenditure are 2.3 times the average between 2007 and 2013, despite there being no associated earnings benefit, it said.Earnings per share (EPS) growth momentum has also been weak, the bank added, with its own forecasts for 2015 standing 5% below consensus estimates.The stock was down 2.7% at 1,922p by 11:44 on Friday.BC