Broker tips: IHG, Ashmore, Trainline, IWG

Peel Hunt has cut both earnings forecasts and its rating on InterContinental Hotels Group, as the Covid-19 pandemic continues to undermine the international hospitality sector.

The broker, which downgraded its recommendation to 'hold' from 'buy', now believes full-year revenue per available room will be down 52% in 2020, compared to its previous forecast for a 46% fall.

RevPar in 2021 is likely to be down 33%, Peel Hunt added, compared to an earlier forecast for a 27% decline.

As a result, Peel Hunt now believes earnings per share in 2020 and in 2021 are likely to be down 54% and 21%, respectively.

"We believe that these changes put our forecasts at the bottom of the consensus range," the analysts noted.

Analyst at Canaccord Genuity slightly raised their target price on investment management firm Ashmore Group from 243.0p to 430.0p on Monday after the company's recent trading update indicated a "continued slowdown" of net outflows.

Canaccord pointed out that net outflows had narrowed to $800.0m from $2.2bn in the fourth quarter and $3.6bn in the third and now "cautiously forecast" small net inflows of $2.1bn for the 2021 trading year as a whole.

The Canadian bank, which also reiterated its 'buy' rating on the stock, stated that Ashmore's investment performance relative to benchmarks over one year had improved in 12 of 13 of its themes.

"Consequently, performance over three years is also improving," said the analysts, which did also note that Ashmore's flows can be "volatile" given their largely institutional nature.

However, Canaccord added that historical experience suggested that net flows were capable of rebounding "strongly" when investment performance improves, after a short lag.

Deutsche Bank initiated coverage of Trainline on Monday with a 'buy' rating and 414.0p price target.

The German bank said Trainline's brief history as a listed company has been almost entirely overwhelmed by the Covid-19 pandemic.

"A 90% overnight decline in passenger numbers has truly tested its business model," DB said. "And the resulting shift towards working from home provides a structural headwind for long-term passenger numbers, at least over the next 12 months."

However, Deutsche said the worst is now behind us and it expects a material recovery over the next 18 months.

"This is partly backed by financial imperative - the government is incentivised to encourage a return to rail (as in France), having only recently taken on full ownership of losses."

Berenberg upgraded its stance on shares of workspace provider IWG to ‘buy’ from ‘hold’ on Monday, lifting the price target to 350.0p from 260.0p as it said the risk/reward investment case is now skewed materially to the upside

"Given an impressively resilient H1 performance, announced cost savings, and the roll-off of a variety of one-off costs in this year’s P&L, we now believe that the company will be able to recover to pre-pandemic levels of profitability as soon as 2021," Berenberg said.

Berenberg said that given the meaningful differences between its downside scenario - to which it assigns a 20% probability weighting - and a number of plausible upside scenarios, it sees the current opportunity as too attractive to miss.

While the flexible workspace industry will be negatively affected by the pandemic, Berenberg reckons changes in the market place will ultimately benefit IWG.

"First, aggressive, loss-making competitors such as WeWork are likely either to downsize or to disappear from the market. Second, we believe the market will shift towards suburban rather than city-centre locations, and to larger corporate enterprise accounts. Both of these markets are where IWG is comparatively best placed to take share, driving further outperformance versus its struggling peers."