Hilton Grand Vacations To Benefit From Selling Owned Inventory, Analyst Says

Mizuho analyst Ben Chaiken initiated coverage on Hilton Grand Vacations Inc. HGV with a Buy rating and price target of $63.

Chaiken foresees upside to estimates from an attainable/beatable ’24 guidance.

In the long term, the analyst forecasts revenue synergies from better utilizing the Bass Pro network and monetizing the existing Bluegreen owner base.

As part of the Bluegreen transaction, Hilton Grand Vacations has highlighted $75 million to $100 million of revenue synergies.

For FY24 and FY25, the analyst sees a 13% provision at legacy HGV and 17.5% at Bluegreen (i.e., no improvement in either), for a blended 14.3% provision.

The analyst adds that Hilton Grand Vacations should also benefit from a transition to selling more owned inventory, which carries significantly greater EBITDA per transaction.

Owned inventory comes with a materially greater EBITDA contribution per transaction relative to the FFS model, the analyst adds.

Per Chaiken, cost headwinds should be more than offset by MSD+ contract sales, the legacy HGV business transitioning to selling more owned inventory (away from Fee For Service), and potential upside in sales & marketing (S&M). 

For FY24, the analyst models EBITDA of $1.24 billion, approximately the midpoint of the guided range ($1.2 billion to $1.26 billion). 

The largest source of upside in the model is conservative S&M expectations. 

Price Action: HGV shares are trading higher by 2.6% to $46.98 on the last check Tuesday.

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