The serviced office group continues to deliver on its promises
Thursday 14 Nov 2019 Author: Daniel Coatsworth

IWG (IWG) 394.4p

Loss to date: 3.6%

Original entry point: Buy at 409.3p, 3 October 2019

A strong third quarter update on 5 November reinforces our confidence in the long-term attractions of IWG. Revenue grew by 15.5% at constant currency for its open centres, driven principally by the Americas, Europe, the Middle East and Africa.

Occupancy levels for the nine months to 30 September improved by 3.1 percentage points to 76%.

Franchising was a key reason why we said to buy the shares last month as IWG stands to create significant value for shareholders by offloading parts of its business to franchisees.

The latest divestment is its Swiss business for £94m to a joint venture owned by private banking group J. Safra and real estate investor P. Peress. As master franchise owner, IWG will provide services and support to the joint venture in return for an ongoing service fee linked to revenue.

IWG reported ‘increasing interest’ in its partnering approach and expects to report further deals in the future. These might include franchise partners in the US, Canada, India and Singapore.

The company is currently buying back £100m worth of shares and bought £22.4m worth of stock in the third quarter.

SHARES SAYS: Delivering new franchise deals is vital to driving up the share price in the near-term given IWG already trades on a rich valuation. We remain positive on the stock.

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