InterContinental Hotels Group Plc (LON: IHG)

Business Overview
InterContinental Hotels Group Plc is a Denham, United Kingdom-based company. It is into hotel business with its operations spread across worldwide. Currently, the company has 5,795 hotels and 864,699 rooms under its brand name. The company owns, franchise, manage and lease hotel.

Recent News
On 18^th February 2020, the company announced that Sharon Rothstein is to be appointed as an independent Non-Executive Director of IHG. She will join the IHG Board with effect from 1 June 2020.

Financial Highlights - Financial Year 2019 (31^st December 2019, USD, million)

(Source: Interim Report, Company Website)

In the fiscal year 2019, the Group’s total revenue grew by 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 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 on 18^thFebruary 2020, before the market closed (Source: Thomson Reuters)

On February 18^th, 2020, InterContinental Hotels Group Plc shares were trading at GBX 4,750 at the time of writing before the market close (at 8:16 AM GMT), down by 1.80 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 5,770/GBX 4,483. The stock price has given2.61 per cent returns during the previous year. In the last month, the stock price has given negative 7.89 per cent returns.

Valuation Methodology

*Peers: Restaurant Group Plc, SSP Group Plc, J D Wetherspoon Plc, Compass Group Plc, and Whitbread Plc

Conclusion
In the fiscal year 2019, the company has reported a 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 strong, and its cash-generative, resilient fee-based model would benefit it in the growth of its business. However, the performance of the Group could be impacted by macro and geopolitical factors, increased supply growth ahead of demand in some markets, and ongoing unrest in Hong Kong SAR. Also, the coronavirus outbreak in China could affect the revenue and profitability of the company.

Based on the valuation and factors as highlighted above, we recommend investors to keep a “Watch” on the stock at the current price of GBX 4,902.50 (as on 18th February 2020 before the market close at 9:05 AM GMT), with support from any relief from coronavirus to be evaluated at a later stage. 

HSBC Holdings Plc (LON: HSBA)

Business Overview
HSBC Holdings Plc is a banking company. The company provides retail banking, commercial banking, global banking & markets, and global private banking. The company offers various banking products and services across the geographies.

Financial Highlights - Financial Year 2019 (31^st December 2019, USD, million)

(Source: Interim Report, Company Website)

In the fiscal year 2019, the company’s reported revenue grew by 4 per cent to USD 56,098 million as compared to USD 53,780 million in the fiscal year 2018. Reported profit before tax during the period was USD 13,347 million against USD 19,890 million in FY2018 due to a goodwill impairment of $7.3bn. Reported profit after tax in FY2019 was USD 8,708 million against USD 15,025 million in FY2018. Profit attributed to ordinary shareholders declined by 53 per cent to USD 5,969 million versus USD 12,608 million in FY2018.

Share Price Performance  

Daily Chart as on 18^thFebruary 2020, before the market closed (Source: Thomson Reuters)

On February 18^th, 2020, HSBC Holdings Plc shares were trading at GBX 553.20 at the time of writing before the market close (at 10:35 AM GMT), down by 6.30 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 687.70/GBX 550.50. The stock price has givennegative 16.70 per cent returns during the previous year and some pullback relief rally is expected at these levels.

 
Conclusion
The company’s financial performance has declined in the fiscal year 2019. It incurred a goodwill impairment of USD 7.3 billion. The company remains active against future movement of loan costs and international trade tensions, as it may result in downside risks for shareholders. The company has prepared for the UK’s exit from the European Union and to provide hassle-free services to all the clients based in Europe and the UK. The deteriorating revenue environment will force the company to make changes in FY2020, which would result in increased restructuring charges and impairment of goodwill. The company is also looking forward to rebalancing its capital. In the UK, the company is looking forward to transforming itself digitally, growing cards and payments channel and the emergence of Fintech. The company is also looking forward to expanding its operations in the Chinese region, which will offer new opportunities to grow and help the company to offset the impact created by the economic and political uncertainties globally. The company looks promising and remains attractive to invest for the long term.

Therefore, based on the above rationale, we have given a “Hold” recommendation at the current price of GBX 552.20 (as on 18th February 2020, before the market close at 10:30 AM GMT).
 
*All forecasted figures and information have been taken from Thomson Reuters.                                                            
*Currency exchange rate taken for 1 US Dollar = 0.77 GBP.

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