Don't Forget About Travel And Leisure Stocks, Investors
MKM Partners analyst Christopher Agnew argued in a note on Wednesday that travel and leisure related stocks have sold off with the general market on macro concerns.
The analyst argued that the move may not be fully justified and picked out four names whose fundamentals should be "much less" impacted by the economic environment.
The four names represent "buy ideas" in the current volatile market and include: ClubCorp Holdings Inc (NYSE: MYCC), Extended Stay America Inc (NYSE: STAY), InterContinental Hotels Group PLC (ADR) (NYSE: IHG) and Wynn Resorts, Limited (NASDAQ: WYNN).
"Common themes include: U.S. focus, lower-cyclical/recurring revenue streams, good dividend yields and attractive relative valuations," Agnew stated in his note.
ClubCorp: Member Retention ‘Resilient'
According to Agnew, ClubCorp is positioned to perform well in any economic environment, as the company has seen high member retention rates even through recessions. In addition, the company is the "only strategic buyer" in a fragmented industry and faces "unique" M&A growth opportunity.
Extended Stay: ‘Unique' Self-Help Story
According to Agnew, Extended Stay represents a "unique" self-help story through Revenue Management System (RMS) and renovations that should reduce the rate gap between the company and its peers. In addition, the stock is trading at 10.4x EV/2016 EBITDA, a discount to the 12x-15x its peers are trading at.
InterContinental: Underappreciated Business
According to Agnew, InterContinental's strong and less-cyclical fee business is "under-appreciated," as 85 percent of fee income is based on hotel revenues and 95 percent of operating profit is from fee businesses pro forma for asset sales of which approximately 60 percent are U.S. based.
Agnew also noted that the company's return on invested capital has "improved substantially," while the firm is also a "good potential candidate" to participate in industry consolidation. Finally, a potential catalyst in 2016 is the return of $1.3 billion of cash to shareholders in the form of a special dividend.
Wynn: Another Underappreciated Fee Business
Finally, Agnew noted that Wynn is also an under-appreciated franchising business with lodging representing 30 percent of EBITDA. The company is also "investing smartly" in an umbrella marketing campaign and a revamped Wyndham Rewards program.
Agnew also added that upside can come from strong European rental demand (and the recent strengthening of the euro), its timeshare business – which has a recurring fee stream, along with a "strong" free cash flow and stock repurchases.
Image Credit: Public Domain
Latest Ratings for WYNN
|Mar 2017||Aegis Capital||Upgrades||Neutral||Buy|
|Dec 2016||Aegis Capital||Initiates Coverage On||Neutral|
© 2017 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.