JPMorgan upgrades Whitbread, InterContinental Hotels

JPMorgan Cazenove upgraded Premier Inn owner Whitbread and InterContinental Hotels on Tuesday as it took a look at hotels and caterers, saying that within hotels, concerns over the future of business travel are overdone versus expectations being complacent on the future of on-site catering.

JPM upped Whitbread to ‘neutral’ from ‘underweight’ and lifted the price target to 2,400p from 2,050p. The same rating upgrade was applied to IHG, with a price target change to 4,400p from 3,350p.

Accor was lifted to ‘overweight’ from ‘underweight’, with the price target raised to €30 from €22.

JPM said that six months into Covid-19, its preference within leisure has shifted to hotels over caterers.

"We now have a better understanding of the cyclical pressure versus structural change in hotels versus catering, respectively. Simply, we trust that the hoteliers will get back to previous profitability levels, and quicker, whilst we have reservations for the caterers where the pandemic will likely trigger unprecedented changes to the longer term business models," it said.

"Ultimately, this will trigger a revenue and profitability reset below market expectations, in our view."

JPM noted that France’s Accor has streamlined costs and simplified its business, and said its sound balance sheet should support small/midscale M&A, allowing the company to emerge from the crisis stronger.

"We think IHG is a high quality business and management, whilst risks around Whitbread, are now both priced-in."

JPM maintained its rating on caterer Compass at ‘underweight’.

At 1405 BST, Whitbread shares were up 2% at 2,300p, while IHG shares were 2.4% higher at 4,281p. Accor was up 5.7% at €24.25.