UPDATE: Barclays Initiates Coverage on Hilton Worldwide at Overweight, Announces $25.00 PT
Barclays has initiated coverage on Hilton Worldwide (NYSE: HLT) with an Overweight rating and $25 price target.
Hilton is the largest hotel company in the world with $2.2bn in earnings before interest, taxes, depreciation, and amortization (EBITDA). Hilton has 672,000 rooms current and 186,00 rooms under development with 76% of Hilton's EBITDA generated domestically.
Barclay's $25 price target is based on a blended EV/EBITDA multiple of 13.1x on our 2015 adjusted EBITDA estimate of $2,621.9mn. Barclays ascribes12.5x EV/EBITDA multiple to Hilton's owned EBITDA, a 14.5x EV/EBITDA multiple to Hilton's management and franchise fees and an 8.0x EV/EBITDA multiple on Hilton's Timeshare EBITDA.
Recent transactions reduced net debt/EBITDA from 9.1x in 2011 to an estimated 5.3x by the end of 2013, Strong free cash flow generation should lower net debt/EBITDA to 3.7x by 2015.
Hilton has an International/US mix of 60%/40% positioning the company for growth. Hilton should drive higher unit growth than its peers (5.6% and 6.0% in 2014E and2015E, respectively, versus 4.0% and 4.4% for MAR and 2.8% and 1.2% for HOT). Robust EBITDA, EPS and RevPAR growth through 2015. Our 2014E Adjusted EBITDA, EPS and RevPAR growth are $2,408mn (+9.5% y/y), $0.58 (+6.6%) and 5.3%, while our 2015E EBITDA, EPS and RevPAR growth are $2,622 (+8.9%), $0.71 (+ 22.5%) and 5.5%.
Hilton Worldwide Holdings Inc is currently trading down 1.21 percent or .27 at 21.98.
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