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By: Allie Leon. Valuation of Equity. Operations. 3900 lodging properties in 72 countries Hopes to open 100 new properties, adding 18 countries by the end of 2014 The largest hotel chain in the world Controls about 10 % of US hotel market and 1% worldwide
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By: Allie Leon Valuation of Equity
Operations • 3900 lodging properties in 72 countries • Hopes to open 100 new properties, adding 18 countries by the end of 2014 • The largest hotel chain in the world • Controls about 10 % of US hotel market and 1% worldwide • Main operations are in the US, although strong presence in Canada, the UK, and China • Made up of 19 brands • Ritz Carlton, JW Marriott, Fairfield Marriott, Courtyard Marriott, etc. • Most revenue from franchise arrangements
Simple Equity Valuation VEq= VEnt – VD Vent 7,571 NFL 2,931 Value of Equity $4,640 Value per share = $4,640/294.87shares = $15.74/sh
Value Line forecasts 2014-2018 Equity valuation using the dividend discount model
Equity estimation using the residual income model “g” = growth in residual income -Plugging inValueLinestock price ($49.70) for V0Eq and solving for implicit growth g = 8.29%
Reasonableness Check: 1.0829 = CI2019 - .1150 * 15.52 1.94 CI2019 = $3.88 1 + g = (3.88/3.42) = 1.1321 *analysts think growth in residual income is 13.21%, while the market tends to give the company 8.29% -makes sense my computed growth is less because analysts tend to be overly optimistic
Sensitivity analysis • Marriott highly overvalued recommend SELL • The stock will eventually revert to its true value which I believe is below the market value • Other variables I considered: • Sales growth est. (both long term and short term) • EATO and EPM • Overall WACC **Hoping that when I dig deeper into the footnotes in Mod 10 and reevaluate some of my earlier assumptions, I will be able to get closer to the enterprise value
Sources • Marriott International, Inc. 2012 Annual Report • Yahoo Finance • NASDQ