The high-flying FTSE 100 has come off the boil prior to now couple of weeks as the danger of a world commerce battle rises. One Footsie inventory that has fallen greater than most is InterContinental Resorts Group (LSE: IHG). Now at 8,600p, it’s down 21% in simply over a month.

Taking a longer-term view nevertheless, IHG inventory has been an enormous winner. It’s nonetheless up 160% over the previous 5 years, not together with dividends. In my eyes although, the agency stays a horny funding proposition, making this a possible dip-buying alternative for my portfolio.

Capital-light mannequin

IHG operates greater than 6,600 accommodations worldwide throughout 20 manufacturers, masking the posh, premium, and midscale segments. These embody InterContinental, Regent, Kimpton, Crowne Plaza, and Vacation Inn. 

The agency primarily follows an asset-light franchise and administration mannequin, that means it doesn’t personal most of its places however earns cash by means of charges paid by resort homeowners. That is enabling it to increase quicker all over the world.  

In contrast to US rivals Marriott and Hilton, which have a stronger emphasis on luxurious, IHG has established a robust presence within the midscale section. This technique permits it to cater to a variety of travellers.

Strong progress

In mid-February, the corporate launched its 2024 outcomes. It reported $2.3bn in income from its core franchise and administration enterprise, up 7% 12 months on 12 months. Core working revenue jumped 10% to $1.12bn.

IHG added 371 new accommodations (59,100 rooms) in 2024, a 23% improve, with a world pipeline of two,210 accommodations (325,000 rooms).

Income per obtainable room (RevPAR) elevated 3% globally, pushed by 6.6% development in EMEAA (Europe, Center East, Africa and Asia) and a couple of.5% within the Americas. Nevertheless, Higher China fell 4.8% and stays a weak market. Larger RevPAR means accommodations are charging extra per night time and/or filling extra rooms. The three% determine was larger than what analysts have been anticipating (2.6%).

In the meantime, the agency hiked the dividend by 10% and introduced a brand new $900m share buyback programme. The forward-looking dividend yield right here although is a modest 1.7%.

Why’s the inventory down?

Now for the not-so-good bits. Internet debt elevated to $2.78bn, largely resulting from shareholder returns. And there have been larger curiosity funds, with adjusted curiosity expense rising from $131m to $165m.

In 2025, IHG says its adjusted curiosity expense can be between $190m and $205m, surpassing analysts’ estimates of $174m. This concern led some analysts to downgrade the inventory, particularly because it was buying and selling at a premium valuation above 10,000p. 

One other concern right here is the rising risk of a recession within the US, IHG’s largest market. This might thwart development and affect earnings.

Silly perspective

Trying to the long run although, I believe there’s rather a lot to love right here. Most of the firm’s manufacturers are very established and it has a horny enterprise mannequin that produces excessive margins and recurring income.

In the meantime, main international resort manufacturers are anticipated to proceed a long-term development of taking market share. The valuation additionally appears affordable. Proper now, the inventory is buying and selling at round 22 occasions this 12 months’s forecast earnings.

Lastly, IHG plans to increase in quite a few high-growth markets over the approaching years, together with India and the Center East. I believe the inventory will get well and do effectively long run, which is why I’m contemplating shopping for it.