Goldman starts bullish coverage on IWG as asset-light model gains traction

Goldman Sachs has begun offering positive coverage of International Workplace Group (IWG), the world's largest flexible office provider. The investment bank initiated coverage on Monday, assigning the stock a Buy rating and setting a price target of 270 pence. Since October 9, IWG's stock has fallen 22.4% to 183.7 pence. IWG has a market value of £1.80 billion and an enterprise value of £7.20 billion.

The brokerage firm highlighted IWG's shift towards a landlord-funded fit-out model, similar to the hotel industry. Under this approach, property owners cover the cost of fit-outs, while IWG collects fees. Goldman expects gross profit from this new business to increase 116% to $324 million by fiscal 2028, up from 86% of fiscal 2025 gross profit.

The firm projects IWG to generate cash while the managed and franchised business expands, with 257,000 rooms in the pipeline. Goldman anticipates EBITDA growth at 14% annually over three years, reaching $325 million in fiscal 2028 and a free cash flow of $80 million in fiscal 2026, $325 million in fiscal 2028. The brokerage envisions net debt falling to 0.8 times EBITDA.

Goldman values IWG at 7.5 times fiscal 2028 operating profit, a discount from its recent trading range due to higher interest rates. The current share price, equating to 3.8 times fiscal 2028 EBITDA, undervalues the managed and franchised arm at 11.5 times EBITDA compared to the average hotel peer of 15.0 times. Goldman's three primary risks include a recession impacting demand, landlords launching their own flexible office brands, and slower-than-expected maturation of new centers. Customers with short-term leases can vacate spaces quickly during economic downturns.