Episode Details

InterContinental Hotels Group PLC (IHG) H1 2026 — H1 2026 (six months ended June 30; the Form 6-K hit EDGAR at 06:08 ET on Tuesday August 11, before the open, so Tuesday IS the reaction session): adjusted EPS 274.7c vs a 265c bar, IFRS basic EPS 283.3c, down 5.6 pct. The adjusted line BEAT; the stock rose 0.15 pct. IHG grew adjusted EPS 13.3 pct, lifted fee margin 120bp to 65.9 pct and raised the interim dividend 10 pct for a fifth straight year - and the shares closed up 0.15 pct. The half is not in dispute. The price is: 4.6 of those 13.3 points came from a 4.0 pct fall in the share count, not from profit. THE CALL: AVOID (3/5, MEDIUM - A SUPERB BUSINESS AT A DOUBLE-COUNTED PRICE) — base-case value ~$118.68 vs ~$160.22 today. KEY METRICS: - CALL: AVOID, 3/5. Fair value 120.26 USD against the 160.22 USD close - 24.9 pct below the tape and 26 pct below the 162.83 USD Street average. Ten years of IHG's own adjusted free cash flow discounted at a 9.33 pct cost of equity: bear 85.94, base 118.68, bull 157.75. Even the bull case is below the price. - THE 13 PCT IS PART ARITHMETIC: adjusted earnings grew 8.71 pct, from 379M to 412M USD. The basic weighted average share count fell 4.03 pct, from 156.3M to 150.0M. 1.0871 divided by 0.9597 is 1.1327 - so 4.6 of the 13.3 points, about 34 pct of the headline growth, is the denominator, not profit. - AND THE DENOMINATOR IS NOT FREE: adjusted interest expense rose 16.5 pct to 106M USD, which IHG attributes largely to returning capital to shareholders. After the 26 pct adjusted tax rate that is 11.1M USD, or 2.9 points of earnings growth handed straight back to fund the same buyback. - THE MINUS 6 PCT IFRS EPS IS THE FAKE NUMBER: the bridge swings 77M USD year on year and 79M of it is foreign exchange - a 79M gain in H1 2025 against a 7M loss now, on translation of intra-group balances. The System Fund adds 29M more, and exceptional items were a 28M TAILWIND. Adjusted is honest here. - THE Q2 EXIT RATE IS THE REAL RISK: H1 RevPAR was plus 4.1 pct but Q2 alone was plus 3.5 pct. EMEAA went 5.6 pct to 0.6 pct; Greater China 5.7 pct to 0.8 pct. Only the Americas accelerated, to 5.4 pct, and IHG says roughly 1.0pt of that was the FIFA World Cup. Two of three regions exited under 1 pct. - THE RETURNS EXCEED THE CASH: 2026 shareholder returns of about 1,235M USD - 950M of buyback plus 285M of dividends - against roughly 845M USD of adjusted free cash flow. About 390M USD must be borrowed. Net debt rose 330M in six months, 564M of the movement being returns, and leverage is 2.63x. - WE DIFFER FROM THE STREET ON THE GROWTH RATE, NOT THE HALF: at 160.22 USD the tape needs 12.6 pct annual growth in TOTAL cash flow for five years. IHG's 12-15 pct algorithm is PER SHARE and says it assumes ongoing buybacks. The Street average is 162.83 USD but the MEDIAN of 152.00 is already below the close. What to watch: UP: two consecutive quarters of RevPAR above 3 pct in BOTH EMEAA and Greater China; fee cost base held at the low end of the 1-3 pct guide while margin adds 150bp. DOWN: the Q2 exit rate of 3.5 pct proving to be the run rate, Middle East disruption persisting, adjusted interest running past the 240M USD guide. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision. Learn investing free in the Charged Alpha app: https://chargedalpha.com/app?source=youtube&ref=video Educational only. Not financial advice.