Jefferies has reiterated its 'buy' view on Intercontinental Hotels on the prospect of more substantial cash handouts this year
IHG told Jefferies it has not seen a slowdown "in any consumer market" even though Airbnb recently reported some softening of pricing,
As a result, Jefferies sees scope for further buybacks later this year with up to around 9% of the current market cap of £9.2bn potentially being doled out.
“We see scope for upside to the US$750mln share buybacks in 2023.
“On our numbers, we see the company reaching 2.2x leverage (inc leases) by year-end.
“Reaching 3.0x leverage would imply scope for a further $500m of buybacks.”
Equally, Jefferies expects the valuation gap between IHG and rival Marriott to narrow on a similar NUG (net unit growth) profile, greater exposure to Asia, and greater earnings defensibility this year.
Business is a key source of upside to the numbers, added the broker, with high single-digit pricing on flat occupancy would imply mid-single-digit growth support to RevPAR.
Hotel choice is also shifting towards conversion or soft brands, where IHG is represented by voco (upscale) and Vignette (luxury).
Economics here are also attractive for IHG, said the broker, as it earns the same percentage fee on soft and hard brands
Jefferies expects IHG to focus on the key luxury brands of Six Senses, Kimpton and Regent and in economy. the avid chain.
Target price for the broker is 6,200p. Shares were flat today at 5,386p.