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HHC

Hyatt Hotels Corporation “ HCC” (NYSE: H ) Valuation using Forecasted Cash Flows Meghan Shevlin February 5, 2014. HHC. Hyatt: global hospitality company engaged in management, franchising, ownership and development of Hyatt-branded hotels, resorts, residences

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HHC

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  1. Hyatt Hotels Corporation“HCC” (NYSE: H)Valuation using Forecasted Cash Flows Meghan Shevlin February 5, 2014

  2. HHC • Hyatt: global hospitality company engaged in management, franchising, ownership and development of Hyatt-branded hotels, resorts, residences • Highly competitive industry with 21M rooms available • Hyatt owns 500 properties (135,144 rooms) • Much of revenue comes from franchising fees and hotel revenues (i.e. food sales) • Hotel industry still being hit by recession • Industry growth of 3.3% expected through 2018

  3. Parsimonious Assumptions • Sales growth rate: 7.25% • Increased due to analyst expectations of 11% growth • Enterprise profit margin: 5.25% • Increased dictated by increase in ADR and RevPAR which measures average room rate and suggests more rooms are sold at full price not sold at a discount • Enterprise asset turnover: 1.40 • Increase due to increase in Sales

  4. Free Cash Flow • FCF = EPAT - NEA • Large portion of Hyatt’s NEA is to PPE • To have sales grow at expected rate H must run more efficiently. Their high NEA suggests underutilizationof properties, franchising will solve this issue

  5. Valuing Hyatt Continuing Value 7.25% sales growth rate, discounted back 10% cost of capital

  6. Continuing Values Intrinsic value of H enterprise operations = $2.18B

  7. Conclusion • Hyatt is expected to grow significantly through 2018 • Parsimonious assumptions had to be adjusted to properly value H • Industry specific ratios give guidance on adjustments (ADR & RevPAR) • Continuing value assumes future payoffs follow a predictable pattern

  8. Questions?

  9. Sources • Hyatt Hotel Corporation Annual Report 2012 • Hyatt Hotel Corporation Investor Fact Book 2012 • Valuation for Financial and Accounting Professionals: A Guide to Valuation and Financial Statement Analysis, Easton, Sommers • www.nasdaq.com/symbol/h

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