DCF Studio

    IHG.L · LSE · Consumer Cyclical

    InterContinental Hotels Group PLC

    Also onConsensus Drift

    Implied value per share

    USD 98.72

    Market price

    USD 151.85

    Implied upside

    -35.0%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    NoteRisk-free rate is an assumption: GBP assumption - no free live source available for this market.

    Value Per Share

    Perpetuity growth
    USD 98.72-35.0%
    Exit multiple
    USD 179.11+18.0%
    Market price
    USD 151.85

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn2bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 5.7bnUSD 6.3bnUSD 6.9bnUSD 7.6bnUSD 8.4bn+10.1%
    EBITUSD 1.2bnUSD 1.3bnUSD 1.5bnUSD 1.6bnUSD 1.8bn+10.1%
    NOPATUSD 905.6mUSD 996.8mUSD 1.1bnUSD 1.2bnUSD 1.3bn+10.1%
    Add depreciation & amortisationUSD 185.0mUSD 203.7mUSD 224.1mUSD 246.7mUSD 271.5m+10.1%
    Less capital expenditureUSD -105.4mUSD -116.1mUSD -127.7mUSD -140.6mUSD -154.7m+10.1%
    Less increase in working capitalUSD 70.7mUSD 77.8mUSD 85.6mUSD 94.2mUSD 103.7m-10.1%
    Free cashflow to firmUSD 1.1bnUSD 1.2bnUSD 1.3bnUSD 1.4bnUSD 1.5bn+10.1%
    Discount factor0.95800.87920.80680.74050.6795-
    Present valueUSD 1.0bnUSD 1.0bnUSD 1.0bnUSD 1.0bnUSD 1.1bn+1.0%
    Present Value Of The ForecastUSD 5.2bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.50%GBP assumption - no free live source available for this market (assumption)
    Equity risk premium5.50%Market assumption
    Beta1.017Reported 1.025, pulled toward 1.0 (Blume)
    Cost of equity10.09%Risk-free + beta x equity risk premium
    Cost of debt4.70%Interest expense / average total debt
    Market capitalisationUSD 22.2bn82.8% of capital
    Total debtUSD 4.6bn17.2% of capital, book value as a proxy
    Tax rate25.0%Effective, capped at statutory
    WACC8.96%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 98.72

    73% of EV

    Forecast FCFF, final year
    USD 1.5bn
    Capex at depreciation, working capital in reinvestment
    USD 1.3bn
    Less reinvestment at g/ROIC (4.2% of NOPAT)
    USD -55.4m
    Capitalised
    USD 1.3bn
    ROIC (reported)
    60.0%
    Terminal value, undiscounted
    USD 20.2bn
    Terminal value, discounted
    USD 13.7bn
    Enterprise value
    USD 18.9bn
    Less net debt
    USD 3.5bn
    Equity value
    USD 15.4bn

    Exit at 18.9x EBITDA

    Value per shareUSD 179.11

    84% of EV

    Terminal value, undiscounted
    USD 38.6bn
    Terminal value, discounted
    USD 26.2bn
    Enterprise value
    USD 31.4bn
    Less net debt
    USD 3.5bn
    Equity value
    USD 27.9bn

    Spread between methods: 58%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.96%126.33137.36150.85167.73189.47
    7.96%103.92111.30120.03130.51143.32
    8.96%87.4992.7098.72105.73114.02
    9.96%74.9378.7683.1088.0593.76
    10.96%65.0167.9171.1574.7978.90

    Outlined: this model. Green text: above today's price of 151.85. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year10.1%19.0%+8.9pp
    EBIT margin21.1%30.8%+9.6pp
    Discount rate9.0%6.9%-2.0pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.