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Valuation Using Cash Flows

Valuation Using Cash Flows. Intercontinental Hotel Group IHG. Julia Lassarat February 5, 2014. Overview. Industry and Firm Introduction Overview of IHG Forecasting Discounted Cash Flow Model 10% WACC 9.6% WACC. Industry Overview.

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Valuation Using Cash Flows

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  1. Valuation Using Cash Flows Intercontinental Hotel Group IHG Julia Lassarat February 5, 2014

  2. Overview • Industry and Firm Introduction • Overview of IHG Forecasting • Discounted Cash Flow Model • 10% WACC • 9.6% WACC

  3. Industry Overview • Resilient industry in the face of slowing economic pace • Revenue per available room (RevPAR) is standard performance metric • RevPAR was up 4.5% in 2012 in comparison to 5.9% in 2011 • Highly competitive market • The global hotel market is estimated to be 21.5 million rooms • 7.5 million of these are branded hotel rooms Source: IHG 2012 Annual Report

  4. SWOT Analysis Internal Factors External Factors Positive Factors Negative Factors

  5. Forecasting Using Sales Growth, EPM, and EATO • Forecast revenues via forecasts of sales growth rates • Forecast EPAT via forecasts of EPM • Forecast NEA via forecasts of EATO

  6. Parsimonious Assumptions • Sales Growth Rate: 5.50% • EPM: 28% • EATO: 1.67

  7. Calculating Free Cash Flow FCF= EPAT- NEA

  8. Discounted Cash Flow Model Enterprise Value on Yahoo Finance: $9.46 Billion

  9. Discounted Cash Flow Model Enterprise Value on Yahoo Finance: $9.46 Billion

  10. Questions?

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