Expect This Ashford Hospitality Upgrade To Positively Impact Peers

• Ashford Hospitality Prime Inc AHP shares are down 19.5 percent year-to-date, despite having spiked 20 percent over the last five trading days.
• Canaccord Genuity’s Ryan Meliker upgraded the rating on the company from Hold to Buy, while raising the price target from $14 to $21.
• A strategic review by the company may result in a transaction that offers AHP shareholders a value close to its NAV, Meliker said.

Ashford Hospitality Prime announced that it is exploring strategic alternatives, including a potential sale. Analyst Ryan Meliker believes that this would fill the gap between the company’s stock valuation and its Net Asset Value.

“We believe the launch of a strategic review process should culminate in a transaction that offers AHP shareholders a value much closer to our current $24.76 NAV estimate,” Meliker wrote.

"Although the stock jumped 15 percent on Friday last week, following the news, there is close to 50 percent upside from current levels,” the analyst said.

Meliker expects the strategic review process to result in a “management-led LBO in which management gets a private capital partner to take AHP private and keep the portfolio externally managed by AINC.”

Such a solution is expected to be a win-win situation, by keeping the fee stream to Ashford Inc AINC intact besides allowing management to maintain control.

Ashford Inc is expected to benefit by having a private capital source that can grow the Ashford Hospitality Prime platform or via the external termination fee. In case of the latter, Ashford Inc is expected to receive $106 million or about $47 per share.