1 / 10

HHC

Hyatt Hotels Corporation “ HCC” (NYSE: H ) Residual Enterprise Income Model Meghan Shevlin February 19, 2014. HHC. Hyatt: global hospitality company engaged in management, franchising, ownership and development of Hyatt-branded hotels, resorts, residences

yaholo
Download Presentation

HHC

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Hyatt Hotels Corporation“HCC” (NYSE: H)Residual Enterprise Income Model Meghan Shevlin February 19, 2014

  2. HHC • Hyatt: global hospitality company engaged in management, franchising, ownership and development of Hyatt-branded hotels, resorts, residences • Highly competitive industry with 21M rooms available • Hyatt owns 500 properties (135,144 rooms) in 42 countries • Hotel industry still suffering from the recession • Industry growth of 3.3% expected through 2018

  3. DCF Model

  4. Residual Enterprise Income Model • Residual income: income generated by a firm after accounting for it’s true cost of capital. It is the earnings in excess of return on NEA • REI model is algebraically derived from the FCF model but anchors the valuation process on the book value of NEA and emphasizes accounting information • REI model is a better indicator of value than the DCF because more value is captured in the short horizon while DCF emphasizes the terminal value

  5. REI Model • Takes into account the finite horizon taking into accounting forecasts of REI and the second horizon is the period beyond 2021 taking into consideration a continuing value • We assume that the growth rate in sales and the growth rate in residual enterprise income will converge (firm’s growth is driven by its ability to grow sales)

  6. REI Model • Since the hotel industry was hit hard by the recession altering assumptions such as EPM, EATO, and Sales growth was necessary • As Hyatt didn’t go public until 2009 there is not prior-recession information to estimate EPM, EATO or Sales Growth. • Industry information was used to forecast the following model • Analysts expect sales growth to increase in the next five years

  7. REI Model

  8. Conclusion • Overall the REI model is a better indicator of value because more value is known with certainty (in short horizon) while the DCF model relies more on terminal value • Many manipulations were performed based on the highly volatile market Hyatt is in

  9. Questions?

  10. Sources • Hyatt Hotel Corporation Annual Report 2012 • Hyatt Hotel Corporation Investor Fact Book 2012 • Valuation for Financial and Accounting Professionals: A Guide to Valuation and Financial Statement Analysis, Easton, Sommers • www.nasdaq.com/symbol/h • www.yahoo.com

More Related