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Broker tips: St James's Place, Intercontinental Hotels Group

By Iain Gilbert

Date: Wednesday 28 Feb 2024

Broker tips: St James's Place, Intercontinental Hotels Group

(Sharecast News) - Deutsche Numis put its rating on St James's Place under review from 'buy' on Wednesday after the wealth manager's full-year results.
The analysts said that while the underlying cash result was close to expectations, SJP's overall cash result fell substantially below at £69.0m, due to a £426.0m net of tax provision taken against "ongoing service evidence".

As a result, the firm cut its dividend to 23.8p from 52.8p and said it plans to rebase future distributions to 50% of underlying cash profits, with a fixed 18.0p per share/year in dividends for the next three years and the balance in buybacks.

"Clearly, this means we once again need to go back to the drawing board in assessing the investment case for SJP," Deutsche Numis said. "It is disappointing to see another piecemeal warning/major adverse development to the investment story in our view, rather than seeing these issues dealt with comprehensively on one occasion.

Numis said its long-term view on the industry's structural asset growth opportunity, driven principally by the DC pension opportunity, clearly does not change. However, it stated it increasingly had to question how well will SJP monetise that opportunity.

Deutsche Numis said it was placing its recommendation, target price of 1,050.0p, and forecasts under review while it establishes what this means for the investment case.

Analysts at Berenberg raised their target price on Intercontinental Hotels Group from 6,000.0p to 7,400.0p on Wednesday following the group's "solid" full-year results.

Berenberg said IHG had delivered "a robust set of results" for FY23, which were broadly in line with expectations.

However, it noted that the shares had risen by 22% year-to-date, something it considers to be "disproportionate" to what the underlying results showed.

"While these results have led to both our and consensus estimates increasing, the shares have re-rated as we think the market is more confident in IHG's growth algorithm of consistent low double-digit EPS growth," said Berenberg.

The German bank, which reiterated its 'hold' rating on the stock, stated that at present, it thinks the multiple looks full and said that its numbers now sit in line with consensus estimates.

"We value IHG using a discounted cash flow, which yields a value per share of 7,400.0p. At present IHG trades on a price-to-earnings ratio of 26.6x our FY24 earnings per share estimate and while peers have also performed well, it has continued to close the valuation gap on its US-listed peer group, which further reaffirms our 'hold' rating."


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