JPMorgan cuts InterContinental Hotels to 'underweight'

The bank said InterContinental appeared the most at risk in its coverage, with its pipeline not warranting much acceleration in room openings, leaving it as essentially a cycle play.

JPM said signings represent 30% of the existing network, compared to 40% at a similar stage of the past cycle.

“We believe management is addressing these concerns, but the short-term consequence is an increase in development costs ($7m guided for FY16e, i.e. a -40bp margin drag for the group).”

It reiterated its ‘overweight’ stance on Premier Inn owner Whitbread, however, saying it is now a de-risked “pure rollout” story with little reliance on cyclical upside.

JPM said Whitbread’s full year 2016 ended on a supportive note with regard to the ongoing rollout, with over 4,000 room openings in the fourth quarter alone and a higher mix of lower-risk room extensions announced for FY17e.

The bank cut its price target on Whitbread to 4,400p from 4,850p.

At 0853 BST, InterContinental shares were down 2% to 2,869p and Whitbread was down 1.3% to 3,718p.