This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
InterContinental Hotels (first half earnings 8 August)
First quarter (Q1) was strong for InterContinental Hotels Group (IHG), with revenue per room up 2.7%. The firm remains confident in the outlook for the full year, with a continuing commitment to maintaining the integrity of the balance sheet. JPMorgan has noted that the US division’s earnings are 5% above the 2008 peak, while in Europe the firm is still 17% below its peak. IHG has put much effort into franchise development in the US and China, but these have yet to bear meaningful fruit. A projected forward operating margin of 42.2% puts IHG ahead of the seven-year average of 36.6%, and far above its peers’ average of 18.9%. At 22 times forward earnings and with a yield of 1.7%, the firm is more expensive and less attractive income wise than peers, which have an average forward price earnings (PE) of 18.3 with a forecast yield average of 4%.
IHG’s chart is one of those trends that is, if nothing else, immensely pleasing to the eye. A record high in June has been followed by another steady pullback. A recovery back above the 50-day simple moving average (SMA) currently at 4338p, would signal a move back towards the all-time high (4490p). The trend has been so strong that a move below 3800p would be the only real sign that IHG’s run is at an end.