Berenberg upgrades IWG to 'buy', shares rally

Berenberg upgraded shares of serviced office provider IWG on Tuesday to ‘buy’ from ‘hold’ as it highlighted a "clear value opportunity".

The bank said IWG is a difficult business to analyse. "Its earnings are volatile, given a high fixed cost base and significantly more variable revenues from customers on short-term contracts. It invests materially in its P&L each year, meaning that traditional earnings multiples can be misleading.

"Its disclosure and accounting are frustratingly complicated. Further, the company has a range of strategic initiatives that could create meaningful upside over the long term and are therefore difficult to value today. Due to these complications, we believe that significant opportunity can come when the market overreacts to near-term disappointments."

Berenberg said the current share price offers one such opportunity, and that IWG’s shares will materially appreciate over the coming 24 months. It noted that the shares have fallen by 37% since its downgrade to ‘hold’ in March last year.

Berenberg kept its price target on the stock at 310p.

At 0925 BST, the shares were up 3.7% at 230.30p.