Morgan Stanley Downgrades InterContinental Hotels

Morgan Stanley recently issued a company report on InterContinental Hotels Group PLC (ADR)

after analysis showed that RevPAR growth is slowing and there may be few M&A opportunities. Analysts at Morgan Stanley downgraded InterContinental Hotels from Overweight to Equal-weight with a 3,050p price target. Jamie Rollo and Vaughan Lewis, analysts at Morgan Stanley, wrote, "IHG...has an attractive fee-based asset-light model, a large pipeline, strong FCF, and scope to continue double-digit EPS growth...Upside to our (unchanged) 3,050p price target is more limited now, and the risk-reward profile to our bull-bear scenarios is very balanced." Although the company was recently downgraded analysts at Morgan Stanley highlighted two keys that could drive shareholder value for InterContinental Hotels. 1. Strong Pipeline Analysts noted that InterContinental Hotels has a pipeline of over 200,000 signed rooms. This gives investors confidence that demand for their hotel services is strong and the company will have the receivables to improve their business operations while driving revenue visibility. 2. High margin business model Morgan Stanley believes that InterContinental Hotels has a strong business model with fee margins that have grown on average by 80 bps per year since 2004. InterContinental Hotels last traded at $40.16, down 0.07 percent.