UPDATE: MLV & Co Initiates Coverage on RLJ Lodging Trust as Multiple Factors Drive Upside

In a report published Monday, MLV & Co analyst Ryan Meliker initiated coverage on RLJ Lodging Trust RLJ with a Buy rating and $29.00 price target. In the report, MLV & Co noted, “We are initiating coverage of RLJ Lodging Trust with a BUY-rating and a $29 year-end price target. We believe the stock's current valuation discount is driven by misguided investor concerns surrounding future supply growth across RLJ's portfolio and an unwillingness to ascribe any value to RLJ's currently non-cashflowing redevelopment pipeline. However, our work supports the view that supply growth in RLJ's submarkets will be modest for years to come and that RLJ's current redevelopment projects is worth $1.81 per share more than investors currently ascribe. Additionally, we believe RLJ's current discounted multiple does not factor in the company's robust property margins, which alone is worth 0.5x on EBITDA. Currently trading at 11.4x EBITDA, RLJ's multiple is over 1.5x below the Lodging REIT average of 13.0x. While we don't expect RLJ to trade at a premium to other high-quality REITs near-term, we do believe that as RLJ's operating results continue to exceed those of peers, the valuation discount will erode.” RLJ Lodging Trust closed on Friday at $24.12.