InterContinental Hotels' shares jumped 6 per cent to an all-time high on news that the hotel operator plans to return $1bn (£640m) to shareholders split equally between a fourth-quarter special dividend and a share buy-back programme. Broker Investec calculates the special dividend alone equates to 6.3 per cent of the current share price, while Panmure Gordon estimates that the buy-back, which is scheduled to begin in the fourth quarter, could boost 2013 EPS by about 8 per cent to 148¢ on a pro-forma basis.
The return of capital is a reflection of InterContinental's strategy of selling off its hotels to focus on managing hotels owned by other people and the anticipated proceeds from the sale of its Barclay Hotel in New York. A Park Lane Hotel is likely to be the next big asset to be sold following the opening of a new hotel in Westminster next year.
Operationally, trading was strong in the first half, with overall revenue per available room (RevPAR) ahead by 6.5 per cent. However, July has seen RevPAR growth fall back to 3.8 per cent. In part this is due to the timing of US holidays and tougher trading comparisons, but it will also raise concerns about a slowdown in the cyclical hotels business.
The large increase in the first-half dividend reflects a rebalancing of payments towards the first half. Panmure expects flat full-year adjusted EPS of 127.4¢.
| InterContinental Hotels (IHG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,714p | MARKET VALUE: | £5bn | |
| TOUCH: | 1,713-1,715p | 12-MONTH HIGH: | 1,714p | LOW: 939p |
| DIVIDEND YIELD: | 2.2%* | PE RATIO: | 13 | |
| NET ASSET VALUE: | 240¢** | NET DEBT: | 80% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2011 | 850 | 205 | 54.0 | 16.0 |
| 2012 | 878 | 284 | 94.8 | 21.0 |
| % change | +3 | +39 | +76 | +31 |
Ex-div: 22 Aug Payment: 28 Sep *Excludes special dividend of $500m to be paid in fourth quarter **Includes intangible assets of $434m, or 149¢ a share £1=$1.56 | ||||
