UBS downgrades hotels group IHG to 'sell' on expensive valuation

1st Dec 2014 10:16

UBS has downgraded Holiday Inn and Crowne Plaza owner Intercontinental Hotels Group (IHG) from 'neutral' to 'sell', saying that the stock is expensive given its concerns about slowing growth."US revenue per available room (RevPAR) growth has been strong since the beginning of 2010 and the stocks exposed to this region have performed strongly," said analysts Jarrod Castle and Chris Stevens."However we think the RevPAR cycle in the US is not without risks."They said that RevPAR has already passed its previous peak, while occupancy growth is slowing and supply growth is rising. Softer luxury RevPAR growth has always preceded a downturn in the past, they added.Meanwhile, the analysts said IHG's shares are trading at 23 times forward earnings, well above the historic average multiple of 18."We are not calling the end of the cycle, but we believe it is late enough in the cycle to not pay peak multiples," Castle and Stevens said.They raised their target price from 2,225p to 2,315p, but the stock was down 0.4% at 2,700p by 11:03.