Broker tips: InterContinental Hotels, Michael Page, Dunelm

7th Oct 2009 13:07

Ahead of results due on 10 November, brokers have been turning their attention to Holiday Inn owner InterContinental Hotels and are seeing signs of a recovery in the business travel market.Broker Panmure Gordon said the relaunch of the Holiday Inn has been driving a turnaround in the fortunes of InterContinental, which slipped into the red in the first half of the year.The broker is now expecting the hotel group's revenue per available room (revPAR) to hold steady in 2010, having previously pencilled in a 2.5% slide in revPAR from 2009 levels.'This leads us to upgrade our 2010 EPS estimate by 12% to 72.7¢, and to increase our price target from 870p to 910p,' Panmure analyst Simon French said. The broker has a 'buy' recommendation on the stock, though it acknowledges that short-term risks still exist in the form of room rate discounting by competitors and a possible swine flu outbreak in the Autumn and Winter seasons.Citigroup has also joined the fan club, raising the stock from 'hold' to 'buy'. The third quarter saw some stabilisation at recruiter Michael Page but broker Charles Stanley reckons things are a long way from getting back to normal and continues to advise its clients to sell the shares.'In our view, the latest labour market data continue to indicate a very sluggish recovery in employment growth suggesting that 'business as usual' remains a long way off,' Charles Stanley analyst Matthew Earl wrote.If forced to invest in the recruitment sector Charles Stanley would pick Hays over Michael Page. The latter's share price is up by almost 60% from a year ago, and trades at 36 times Charles Stanley's projected full-year 2011 earnings per share for the company, which is a 174% premium to Hays.'Moreover, Hays has a prospective dividend yield of c5.6% compared to Michael Page yielding c2.4%. However, we note the uncertainty as to whether Hays will maintain its dividend (we should get the answer tomorrow, we believe that it will),' the broker concludes. Hays is due to issue an interim management statement tomorrow.Bill Adderley, the founder and life president of Dunelm has reduced his holding in the company by 7.8% but Singer Capital Markets argues that the secondary placing of Adderley's shares will improve liquidity in the home furnishing company's shares.'Prior to this announcement, the free float of Dunelm was c. 32.7%, and will subsequently increase to c. 40.5%,' Singer notes. Singer remains a fan of the shares and has a price target of 360p for the stock. 'We initiated coverage on Dunelm last week and in our note we ran sensitivities that show the 3 year CAGR [compound annual growth rate] could double compared to current base forecasts, from 11% to 22%, driven by organic developments and faster expansion,' the broker said. 'We do not believe this prospect is factored into the valuation,' Singer added.