UBS downgrades IHG on limited upside

6th May 2014 09:36

UBS has raised its forecasts for InterContinental Hotels Group (IHG) but downgraded its rating on the stock from 'buy' to 'neutral', saying it sees limited upside for the shares.The bank said that the Holiday Inn and Crowne Plaza owner made a "good start to the year" with the rebound in revenue per available room (RevPAR) in China and Europe stronger than anticipated."We think current trends remain robust both in terms of RevPAR development but also the development of the pipeline. Demand remains high for IHG's brands both from investors and guests which provides confidence to the management team."Meanwhile, the announced $750m capital return was well received by the market and UBS believes there is the potential for further capital returns should the owned hotels in Paris and/or Hong Kong be disposed by IHG, as "interest has been expressed in these assets".The bank has lifted its price target for the stock from 2,200p to 2,225p.However, UBS said: "While we acknowledge the strong operational momentum we downgrade the shares from 'buy' to 'neutral' due to insufficient share price upside relative to our price target to support a 'buy' rating".The stock was down 0.4% at 2,181p by 10:36.BC