IWG slumps on Credit Suisse downgrade to 'underperform'
IWG, formerly Regus, tumbled on Tuesday as Credit Suisse cut the stock to 'underperform' from 'neutral' and chopped the price target to 200p from 245p.
FTSE 250
19,824.16
16:59 26/04/24
FTSE 350
4,470.09
16:59 26/04/24
FTSE All-Share
4,423.59
17:14 26/04/24
IWG
186.20p
16:49 26/04/24
"We see risks to near- and mid-term reported numbers as growth accelerates, earnings per share vulnerability as and when the current cycle comes to an end, tangible pressure on reported earnings numbers from the implementation of IFRS16, and the potential loss of operational momentum following the departure of the CFO/COO."
IWG announced earlier this month that chief financial officer and chief operating officer Dominik de Daniel was leaving the group to pursue other opportunities, with Eric Hageman appointed as CFO.
CS said the implementation of the IFRS16 accounting standards won’t change the economics of the business but will lead to an 18% reduction in 2019 reported EPS due to the phasing of office centre growth.
"Accelerating network growth will, we think, also put pressure on earnings and, while we see the strategic value of building the network in the longer term in what remains a structurally growing market, this will compound negative earnings momentum."
In addition, the bank said the departure of de Daniel puts the improved operational momentum in the US at risk.
"The serviced office market is structurally growing but we think the rapid growth of both IWG and many of its peers leave it more vulnerable into any downturn. While this is not our core case in the coming years, we think it should be factored into valuation multiples. This series of risks means that we view the risk-reward balance as unattractive over the next 12 months."
At 1245 BST, the shares were down 6.5% to 214p.