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IHG presses on with capacity expansion

The hotels group is expanding to its pipeline of rooms at a record rate
IHG presses on with capacity expansion

InterContinental Hotels Group (IHG) continued with its aggressive expansion plans during the first half of its financial year, as the hotel group reported net system size growth of 5.7 per cent. Around 30,000 rooms were opened during the period, up 38 per cent year on year, while 10,000 were removed, in line with IHG’s focus on the “long-term health of established brands”, bringing the global estate to 856,000.

IC TIP: Buy at 5188p

This momentum looks set to continue through the remainder of the financial year. IHG signed agreements for a further 48,000 rooms, a 3 per cent increase year on year and the highest rate in more than a decade, including a record performance from Greater China. Overall, the total pipeline now stands at 282,000 rooms.

Chief executive Keith Barr called this update “significant progress” considering the slower growth environment for revenue per available room. Indeed, revenue per available room was largely flat across all regions during the first half. In May IHG warned that room occupancy rates had dropped 0.2 per cent during the first quarter owing to challenging trading in the US and Middle East. Occupancy in the first half overall was 68.8 per cent, compared with 69.6 per cent during the first half of 2018 and 70.5 per cent by the full year.

Bloomberg consensus forecasts are for EPS of 308p in 2019, increasing to 333p in 2020.

INTERCONTINENTAL HOTELS GROUP (IHG) 
ORD PRICE:5,188pMARKET VALUE:£9.44bn
TOUCH:5,187-5,189p12-MONTH HIGH:5,770pLOW: 3,861p
DIVIDEND YIELD:1.9%PE RATIO:28
NET ASSET VALUE:*NET DEBT:$2.85bn
Half-year to 30 JunTurnover ($bn)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
20182.1130112336.3
20192.2837516739.9
% change+8+25+36+10
Ex-div:29 Aug   
Payment:03 Oct   
*Negative shareholders' equity, including intangible assets of $1.46bn, or 803¢ a share  £1=$1.22