Intercontinental Hotels Group PLC (LON:IHG) has been upgraded to ‘outperform’ from ‘sector perform’ by analysts at RBC, who said that the company had a “low-risk business model” and estimated that it will be able to “easily absorb” a US$438mln reduction in earnings as the coronavirus pandemic squeezed the hotel sector.
In a note on Wednesday, the Canadian bank estimated that the owner of the Holiday Inn and Crowne Plaza hotel chains will “generate cash inflows” in 2020 and that a revenue reduction at the company will “utilise fewer resources” due to its positive working capital balance.
READ: Intercontinental Hotels expects 60% global revenue plunge, axes dividend
RBC also highlighted that the company’s decision to cut its capital expenditure and final dividend had resulted in a US$250mln “cash boost”, which when combined with its other cash left it with around US$1.23bn available.
With IHG focused on franchise hotels that charge a percentage of room revenues as fees, RBC said the group was also “relatively ungeared operationally”.
However, the bank did trim its target price to 4,000p from 4,500p on lower earnings forecasts for the company’s 2021 financial year.
Shares in the company were 4.9% lower at 3,343p in late-morning trading on Thursday.