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HHC

Hyatt Hotels Corporation “HHC” (NYSE: H ) Market Multiple Valuation Meghan Shevlin January 27, 2014. HHC. Hyatt: global hospitality company engaged in management, franchising, ownership and development of Hyatt-branded hotels, resorts, residences

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HHC

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  1. Hyatt Hotels Corporation“HHC” (NYSE: H)Market Multiple ValuationMeghan Shevlin January 27, 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) • Much of revenue comes from franchising fees and hotel revenues (i.e. food sales) • Lodging industry hit by recession and still slowly overcoming affects

  3. Overview • Market Multiple Valuation • Performance measure determines if value obtained is enterprise value or equity value • Computed Multiple will over- or under-value a company regardless of whether that company is properly priced • 1. Market Multiples • 2. Valuation using multiples (NEA, EPAT, NI, RevPAR) • 3. Recommendation • 4. Comfort in recommendation • 5. Conclusion

  4. Market Multiples • Rely on less subjective comparables to provide useful information on the relative value of a company (ultimately depends on comps chosen) • Simplicity allows for ease of calculation and assessment of multiples • Rely on easy to find, key statistics used by investors that create metrics for industry comparison • Comparables used in this valuation have the same reporting dates and reporting currency

  5. NEA Multiple • Enterprise performance measure • Information taken from the balance sheet Enterprise Value= NEA * NEA Market Multiple Equity Value = Enterprise Value + NFA Equity Value/Share = Equity Value/Common shares outstanding Market Multiple = AvgMAR, HOT, ICH Shares currently are trading at $48.57

  6. EPAT Multiple • Enterprise performance measure • Information from income statement Enterprise Value= EPAT * EPAT Market Multiple Equity Value = Enterprise Value + NFA Equity Value/Share = Equity Value/Common shares outstanding Market Multiple = AvgMAR, HOT, ICH Shares currently are trading at $48.57

  7. NI Multiple • Equity performance measure • Information from Income Statement Equity Value = NI * NI market multiple Equity Value/Share = Equity Value/Common shares outstanding Market Multiple = AvgMAR, HOT, ICH Shares currently are trading at $48.57

  8. RevPAR Multiple • Lodging industry specific metric • Because industry did not identify room revenue specifically, total revenues were used Revenue Per Available Room = Room Revenue/Rooms Available Enterprise Value = RevPAR * RevPARmultiple Equity Value = Enterprise Value - NFL Shares currently are trading at $48.57

  9. Average Estimates & Recommendation • Multiples may not represent accurate information based on choice of comparables Based solely on the computed average of estimates of share value, I would recommend to buy stock in Hyatt Hotels Corporation because this suggests that Hyatt is significantly under-valued vs. the current trading price of $48.57

  10. Confidence in Valuation • Hyatt is a significantly smaller company than competitors • Hyatt Net Income : $88M vs $572M, $572M, $562M • Hyatt room ownership : 135K rooms vs 660K, 375K, 675K • MAR, HOT, ICH have similar goals and operate in similar lines of service but vary greatly in size/reach which make them not comparable • Other considered competitors focus solely on other lines of service (Wynn: gaming, Hilton: extremely large) • Overall I believe these multiples are inaccurate due to the sheer difference in size of the comparable companies. These metrics create an inflated share price for Hyatt

  11. Conclusion • Accuracy of Market Multiples for valuation depends drastically on the comparable companies chosen • Compared to MAR, HOT, ICH, Hyatt is under-valued and I would recommend their stock be bought based on this valuation • After analyzing the individual NEA, EPAT, NI, RevPAR multiples these company’s are found not to be comparable

  12. 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

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