InterContinental Hotels Group PLC

InterContinental Hotels Group PLC (LON: IHG) is a Denham, United Kingdom-based company. It is into the hotel business with its operations spread across worldwide.

On 7^th May 2020, the company will announce its first-quarter trading update to 31^st March 2020.

Industry Trends
In spite of a more challenging global economic backdrop, leading to RevPAR growth moderating, increasing room supply illustrates the positive fundamentals for the industry overall, such as growing appetite for branded hotels and increasing disposable incomes. Competition among branded players continues to increase as companies seek growth through organic expansion, acquisitions, and diversification in their offer. The hotel industry is facing challenges, driven by the Coronavirus outbreak. In the short term, the political, economic and factors such as terrorism, oil market conditions and hurricanes can impact demand and supply.

Decent Financial Performance for the year ended 31^st December 2019
2019 was a year in which a sharper and more agile execution of the company’s strategy moved closer to ambitious levels of growth and strengthened the long-term prospects.In the fiscal year 2019, the Group’s total revenue grew by 6.7 per cent to USD 4,627 million as compared to USD 4,337 million in the fiscal year 2018. Operating profit during the period increased by 8.2 per cent to USD 630 million against USD 582 million in the same period last year. Basic EPS grew by 15 per cent to 210.4 cents in FY2019 versus 183.7 cents in FY2018. Net debt increased by 36 per cent to USD 2,665 million in FY2019 against USD 1,965 million in FY2018. The company declared a dividend of 125.80 cents in the fiscal year 2019.

Share Price Performance

Daily Chart as at March-09-20, before the market closed (Source: Thomson Reuters)

InterContinental Hotels Group PLC shares were trading at GBX 3,897.50 before the market close (at 10:30 AM GMT) on 9th March 2020 and were down by 3.32% versus the previous day closing price. Stock 52 weeks High and Low are GBX 5,770 /GBX 3,682.  The group’s stock is reflecting the higher volatility as against the benchmark index, based on the company’s beta of 1.42.

Bearish Technical Indicator
At the current trading level, shares were trading below its long-term crucial support level of 20-day and 50-day Simple moving average price, and prices could fall further from the current trading level.

From the price-performance standpoint, its shares have delivered a negative return of approximately 24.80% on a year to date basis and losses of around 18.30% recorded in the past one-month period.

InterContinental Hotels Group PLC V/S FTSE 100 Index – 6 Months
 
(Source: Thomson Reuters)

In the last months, IHG share price has delivered negative 22.86 per cent return as compared to negative 16.23 per cent return of FTSE 100 index, which shows that the stock has underperformed as compared with the index.

InterContinental Hotels Group PLC V/S Industry V/S Sector – 6 Months
 
 (Source: Thomson Reuters)

In the last six months, IHG share price showed a negative performance of 21.31 per cent. This also reflects that the company is underperforming as compared with the industry and sector performance in six months period.

Key Risks
Inherent threats to cybersecurity and information governance stay significant and dynamic.Macro external factors such as political and economic disruption, the emerging risk of infectious diseases, actual or threatened acts of terrorism or war, natural or man-made disasters could have an impact on the ability to perform and grow.

Conclusion
In the fiscal year 2019, the company has reported decent financial performance.The company has witnessed its strongest growth in over a decade in net system size. The Group has added 65,000 new rooms. The fundamentals of the industry remain decent, and its cash-generative, resilient fee-based model would benefit it in the growth of its business.

Trading conditions are tough in mainland China and in the United States.The company has also witnessed a decline in demand in the Hong Kong market due to a trade dispute between the US-China. China is the rapidly growing market for the hotel industry, but with an increasing dispute between the US and Chinese governments, the growth has been muted. From the perspective of the market, the entire region, including Australia, has been impacted by this economic slowdown. Also, the coronavirus outbreak in China could affect the revenue and profitability of the company.

The company’s EV/EBITDA, EV/Sales, P/E and P/CF multiples are significantly higher as compared to the industry multiple, reflecting overstretched valuations.

Based on the factors as highlighted above, we recommend investors to keep a “Watch” on the stock at the closing price of GBX 4,085.50 (as on 6^th March 2020), with support from any relief from coronavirus to be evaluated at a later stage.

Serabi Gold PLC

Serabi Gold PLC (SRB) is a London-headquartered mining company which is focused on production and exploration of gold in Brazil.

Recent News
On 3^rd March 2020, the company announced additional results from its underground exploration diamond drilling programme and the continuing surface being undertaken on the Sao Chico orebody at its Palito Complex. 

Financial Highlights (as of 31^st December 2019)
2019 was a year when Serabi Gold PLC attained new milestones on the operational front, and the company would anticipate this to translate into outstanding financial results for the year.  In the year, it produced gold of 40,101 ounces from its Palito Mining Complex, which show good performance. The Company’s reported revenue for the nine months period ending on 30 September 2019 stood at $43,940 thousand against revenue of $43,262 thousand for the financial year 2018.  On 31^st December 2019, the company surged its cash to US$14.3 million, representing another quarter of decent financial performance.

The company’s EBITDA for the nine months to 30 September 2019 stood at US$12.1 million, which is increased by 120 per cent as compared with the corresponding period in 2018. The net cash flow was US$4.5 million in the nine months to September 30, 2019.

Share Price Performance

Daily Chart as at March-09-20, before the market closed (Source: Thomson Reuters)

Serabi Gold PLC shares were trading at GBX 82.20 before the market close (at 11:59 AM GMT) on 9^th March 2020 and were down by 0.96% versus the previous day closing price. Stock 52 weeks High and Low are GBX 97/GBX 24. The group’s stock is reflecting the lower volatility as against the benchmark index based on the company’s beta of 0.54.

From the price-performance standpoint, its shares have delivered a return of approximately 24.77% on a year to date basis and added around 15.03% in the past three-months period.

Conclusion
In the near-term, the margin expansion and production growth stood at 100,000 oz. The company has a strong platform for EBITDA growth. The medium-term growth from Coringa Project, with permitting process well advanced with construction planned to be underway in Q1 2021 and expected to be in production ramp-up by end 2021. The company had shown good financial performance in the first nine months of 2019 and will also deliver good results for the financial year 2019. The company’s top-line performance has improved, but its bottom-line performance improved significantly. The company has improved its production guidance for the financial year 2019 as against 2018 production.

Based on prospects, we have given a "HOLD" recommendation at the current price of GBX 79.60 (as on 9^th March 2020, before the market closed at 8:55 AM GMT).

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