Stifel Books A Long-Term Stay In Wyndham Hotels After Spinoff

Wyndham Hotels & Resorts Inc WH spun off from Wyndham Worldwide on Thursday, liberating it from a range-bound stock and providing fresh room to run, according to Stifel Nicolaus.

The Rating

Analysts Simon Yarmak and Alexander Fraser initiated coverage with a Buy rating and $68 price target.

The Thesis

With about 8,900 hotels, Wyndham boasts the largest portfolio in the world, lending to a 41-percent share in the economy market and 37-percent midscale share.

Stifel considers Wyndham highly free cash flow-generative and capable of creating $3.77 in FCF per share in 2019, given its light capital model and high-margin, recurring revenue in royalties and franchise fees.

“In our view, Wyndham Hotels is not an ‘orphan’ spinoff but rather, a spinoff with a natural shareholder base that understands the capital-light lodging model and is attracted to the FCF generation and the shareholder-friendly capital return policy,” the analysts said in a Monday note.

The analysts expect future FCF to be spent on buybacks and dividends.

With shares trading at a discount to peers in 2019 earnings before interest, tax, depreciation and amortization, Stifel anticipates near-term stock outperformance.

Price Action

At the time of publication, shares were set to open around $61.40.

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