UPDATE: Morgan Stanley Initiates Coverage on Hilton Worldwide

In a report published Tuesday, Morgan Stanley analyst Thomas Allen initiated coverage on

with an Equal-weight rating, establishing a $25.00 price target. According to the report, the analysts are bullish on US Lodging and believe HLT is well positioned given its growth pipeline, US-focus, asset ownership and de-levering profile. “Since it went private, Hilton's mgmt team has turned the company around,” the report noted. “HLT is now 1) one of the fastest growing public Lodging companies (est. 6% annual managed / franchised room growth); 2) Its US-centric portfolio provides greater exposure to solid mid-cycle fundamentals, while low “group” exposure mitigates risks associated with the lagging business; 3) Its owned assets allow for greater leverage to the recovery given margin expansion; 4) A strong FCF profile (4% yield) and attractive de-levering story (5.3x YE13 leverage down to an <4x at YE15) lead to a 27% '13-‘16E EPS CAGR.” The report further asserted that although they like some things about HLT, they are still cautious about some remaining factors. “Our PT is based on a blended 13.5x ‘15E EBITDA, though a structural discount to fee-based MAR given FCF profiles,” the report noted. “Note we value HLT's timeshare business at a 10x multiple, above 5-8x historical multiples and VAC's current ~8x due to HLT's asset-light strategy.” HLT closed Friday $22.31.