Morgan Stanley Sees Starwood Hypothetically Valued At $99/Share Amid Strategic Alternatives Review

In a report published Wednesday, Morgan Stanley analysts assigned a hypothetical value of $99 to

, after the company announced that it was exploring "financial and strategic alternatives." Both Starwood and

announced their 1Q EBITDA ahead of expectations and raised 2015 guidance, despite higher currency headwinds. In the report Morgan Stanley noted, "Hilton's appeared to be a strong, clean beat, with outperformance driven by stronger RevPAR, higher owned EBITDA (we have long championed the benefit of owning hotels at this point of the cycle and resulting operating leverage), and higher Managed + Franchised fees, though the extent of the beat may have been somewhat timing driven." Starwood was able to post higher-than-expected results on the back of "stronger timeshare (which can be volatile) and lower G&A (but structural as mgmt have put in place a cost efficiency initiative)," the analysts said. Starwood announced it was exploring "financial and strategic alternatives." "We have done extensive analysis around potential value creation from lodging company consolidations. Given synergies, it appears there are a number of accretive deals (especially on an operating FCF basis, which we view as the correct way to value) for HOT to be either a buyer or seller," the report mentioned. "Our hypothetical assumptions resulted in avg accretion of 17.5% for HOT selling to either a US or European peer, which implies a $99 value assuming HOT stock price at the time of the analysis ($84.35)," the analysts explained.