Company's shares fall back but group says it is confident of outlook despite challenging markets
*InterContinental Hotels* has fallen back after a disappointing first quarter update, with revenues hit by an earlier Easter, a growing number of hotels in London and a slowdown in China.
First quarter revenue per available room rose 3.1% in the three months to March, with strong growth in the Americas but a 2.2% fall in Europe due to the Easter shift from April to March. In China revenues increased by just 1.8% and in April saw a 2.2% fall. The company said:
The region has continued to be affected by the ongoing political leadership change, including tightening of government spending; the China-Japan territorial island dispute and the broader economic slowdown.
[The April decline] reflects a continuation of the factors experienced in the first quarter plus the localised effects from bird flu concerns and the Sichuan earthquake.
But Europe grew by 3.3% in April, benefiting from a reversal of the Easter impact. During the quarter the company also continued its disposal programme, selling the Park Lane hotel in London form $469m. For customers, it plans to rename its loyalty programme and allow members free internet worldwide, which it claims is an industry first. On the outlook chief executive Richard Solomons said:
Our high quality pipeline, broad geographic spread and fee-based model give us confidence for the year ahead despite the ongoing challenging economic conditions in several of our markets.
But the update sent its shares down 61p to £19, and Greg Johson at Shore Capital said:
After April, four month global revenue per available room was ahead by 3.9%. [This] is broadly consistent with ours, and the markets, full year expectations and hence forecasts are unlikely to change (we forecast 2013 pretax profit of $580m adjusting for the Park Lane disposal). This may disappoint. If global revenue per available room growth continues to moderate and with low single-digit net system growth we see a rating of north of 20 times earnings (fully taxed) as full. We retain our sell stance.
Simon French at Panmure Gordon was more positive:
InterContinental trades on a valuation similar to its hotel peers, despite stronger brands and increasing global market share. We retain our hold recommendation and 1,920p price target; however arguably InterContinental is the highest quality hotel stock in our coverage universe, yet we believe retains limited catalysts at this stage for further share price appreciation.
Liberum Capital identified some catalysts, however:
Two possible catalysts remain on the agenda in 2013: i) sale of the New York Barclay, ii) announcement of further cash return to shareholders in the second half of 2013. We continue to view InterContinental as the highest quality European hotel stock and reiterate our 2214p target price and buy recommendation. Reported by guardian.co.uk 47 minutes ago.
*InterContinental Hotels* has fallen back after a disappointing first quarter update, with revenues hit by an earlier Easter, a growing number of hotels in London and a slowdown in China.
First quarter revenue per available room rose 3.1% in the three months to March, with strong growth in the Americas but a 2.2% fall in Europe due to the Easter shift from April to March. In China revenues increased by just 1.8% and in April saw a 2.2% fall. The company said:
The region has continued to be affected by the ongoing political leadership change, including tightening of government spending; the China-Japan territorial island dispute and the broader economic slowdown.
[The April decline] reflects a continuation of the factors experienced in the first quarter plus the localised effects from bird flu concerns and the Sichuan earthquake.
But Europe grew by 3.3% in April, benefiting from a reversal of the Easter impact. During the quarter the company also continued its disposal programme, selling the Park Lane hotel in London form $469m. For customers, it plans to rename its loyalty programme and allow members free internet worldwide, which it claims is an industry first. On the outlook chief executive Richard Solomons said:
Our high quality pipeline, broad geographic spread and fee-based model give us confidence for the year ahead despite the ongoing challenging economic conditions in several of our markets.
But the update sent its shares down 61p to £19, and Greg Johson at Shore Capital said:
After April, four month global revenue per available room was ahead by 3.9%. [This] is broadly consistent with ours, and the markets, full year expectations and hence forecasts are unlikely to change (we forecast 2013 pretax profit of $580m adjusting for the Park Lane disposal). This may disappoint. If global revenue per available room growth continues to moderate and with low single-digit net system growth we see a rating of north of 20 times earnings (fully taxed) as full. We retain our sell stance.
Simon French at Panmure Gordon was more positive:
InterContinental trades on a valuation similar to its hotel peers, despite stronger brands and increasing global market share. We retain our hold recommendation and 1,920p price target; however arguably InterContinental is the highest quality hotel stock in our coverage universe, yet we believe retains limited catalysts at this stage for further share price appreciation.
Liberum Capital identified some catalysts, however:
Two possible catalysts remain on the agenda in 2013: i) sale of the New York Barclay, ii) announcement of further cash return to shareholders in the second half of 2013. We continue to view InterContinental as the highest quality European hotel stock and reiterate our 2214p target price and buy recommendation. Reported by guardian.co.uk 47 minutes ago.