Market Multiple Valuation

1. Market Multiple Valuation Intercontinental Hotel Group IHG Julia Lassarat January 27, 2014

2. Presentation Roadmap • Industry Overview • Company Overview • Market Multiple Valuation • Background • Steps • Valuation of IHG • Valued Amounts • Buy/ Hold/ Sell?

3. Industry Overview • Resilient industry in the face of slowing economic pace • Revenue per available room (RevPAR) is standard performance metric • RevPAR was up 4.5% in 2012 in comparison to 5.9% in 2011 • Highly competitive market • The global hotel market is estimated to be 21.5 million rooms • 7.5 million of these are branded hotel rooms Source: IHG 2012 Annual Report

4. Top Ten Hospitality Trends Expected in 2014 • Millennial customer base • Increased need for speed/ precision • “WOW” customer service • Increased leadership involvement • More international/leisure visitors • Social Media/Mobile Phone symbiosis • Content marketing will replace traditional ads • Renewed focus on property websites • Increased attention to review sites • Reputation Management Source: Hotelnet.com

5. Lodging Industry in the News • Africa is to become the next battleground for the Hotel industry • Marriot has fundamentally upped the standard of hotel meetings with its Meetings Imagined package • The rising middle class in China is boosting hotel revenue and expansions in the country • Recent rush of hotel IPO’s • Hyatt Hotels, Extended Stay America, and Hilton Worldwide

6. Porter’s Five Forces High; increased bargain hotel sites and access to internet Buyers Neutral; high initial investment, but low marketing costs High due to market saturation New Entry Industrial Competitors Substitutes Suppliers Low with exception to labor wages

7. SWOT Analysis Internal Factors External Factors Positive Factors Negative Factors

8. Market Multiple Valuation • Helpful as an initial and cheap valuation tool • Do not rely on subjective future forecasts • Can generate equity or enterprise value • Equity value metrics are often used

9. Steps to Using Market Multiples • Select performance metric • Select comparable companies • Compute the market multiple of comparable companies and combine them into a multiple for your company • Compute your company’s value using the its market multiple • Calculate out enterprise value per share

10. Selected Performance Metrics • EPAT • NI • Price/Sales • NEA • Book Value

11. Using an Enterprise Metric (EPAT) Stock Price is $33.34 *All Figures except Equity Value per Share in millions

12. Using an Equity Metric (NI) Stock Price is $33.34 *All Figures except Equity Value per Share in millions

13. Resulting Valuation Metrics

14. Reconciling the Differences Total Difference is Positive BUY

15. QUESTIONS?