FIN 505 Report HLT
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School
University of Illinois, Springfield *
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Course
505
Subject
Finance
Date
Feb 20, 2024
Type
docx
Pages
8
Uploaded by EarlResolveBadger8140
Student Managed Investment Fund (SMIF) Project
University of Illinois Springfield
FIN 505B: Investments
Selected Company
Hilton Worldwide Holdings Inc. (HLT)
Last Stock Price
$167.37
Implied Share Price
$160.63
Recomme
ndation
The intrinsic value is lower than its current market value –
this is considered “overvalued” and less favorable for investors. My recommendation will be to not invest in HLT
shares at this time.
COMPANY VALUATION REPORT FOR UIS SMIF
Executive Summary
Hilton is a leading worldwide hospitality company with 22 world-class brands under their
portfolio. As of December 31, 2022, Hilton has 7,165 properties consisting of 1,127,430 rooms
1
and suites in 123 countries/territories. Discussion of risks and opportunities will be researched to
emphasize the need of purchasing stock within the Hilton umbrella. The pros and cons will be
shared to come up with a final decision on the investment fund project. Part I: General Information
Compa
ny
name
Hilton Worldwide Hotels (HLT)
Compa
ny
CEO
Christopher Nassetta
Other
Key
Executi
ves
Jonathan Gray, Charlene Begley, Chris Carr, Melanie Healey, Raymond Mabus, Judith McHale, Elizabeth Smith, Douglas Steenland
Compa
ny’s
busines
s
Found in 1919, with over 100 years of experience in the hospitality industry engaging in managing, franchising, owning, and leasing hotels plus licensing and marketing properties
Compa
ny’s
main
product
s
Hotels and Resorts -providing hospitality for guests and obtaining loyalty through reward program (Hilton Honors)
Compa
ny’s
market
Lodging for business and leisure travelers, trading, and investment Compa
ny’s
supplie
rs
Food and Beverage, Advertising and Marketing, Hotel and Tourism, Partnerships with other brands, Software and Programming
Compan
y’s top
competi
tor 1
Marriot International (MAR)
Compan
y’s top
competi
tor 2
Intercontinental Hotels Group (IHG)
2
Compa
ny’s
market
share
HLT 10-K (2022)
Opport
unities
Rising demand for luxury travel; Expanding global brand recognition; Technology advancements; Diversified portfolio
Risks
Competition, Market dependent, High-debt levels, Limited revenue sources
Earnin
gs call
Who attended the
call from the
company?
Executives and Analysts
Tone of
management
Forward-looking and Optimistic
Challenges &
risks faced
Going into 2024 Questions asked
by analysts
1)
Accelerating net rooms growth and limited service? 2)
Group business and view for next year? 3)
RevPAR and EBITDA highlights?
Management
responses to
analysts’
questions
1)
COVID-19 influenced limited supply chain; region dependent. 2)
Granular analysis, production and conversion, development opportunities
3)
Cash flow analysis, corporate expense timing, natural disasters ex: 3
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Israel
Future guidance
Group and business travel is set to increase; trying to get back to the 6-7% growth rate
Suspicious
behavior by
management
Risk and unsureness, overall great communication and straight-forward
Most surprised
about
Corporate expense and budget analysis
Difficult parts of
the report
Being dependent on various issues – the research analysts could have asked better questions, room for research and development to secure future investments.
Part II: DCF Valuation
4
Part III: Sensitivity Analysis
5
Part IV: Environmental, Social, and Governance Factors
Hilton has implemented factors to create long-term value to its stakeholders. These factors include business modeling, business viability, and long-term loyalty to hospitality (100 years +). The ESG strategy framework established in 2022 tackled all three components: environment (aiming toward a net zero future of carbon, energy, water, and waste), social (career advancement and supporting the communities), and governance (being transparent with overall goals, leveraging public affairs, and focusing on policies and reporting). The risks involved with ESG include climate change, natural disasters, supply chain disruption, health and safety, fraud, and corruption. With the guidance of the board of directors and audit committee, strategic planning is made to help aid stakeholders with their business tactics. Going into future terms (2023-2024), new strategic planning will introduce new environment and social
impact goals with quarterly reporting on updated emissions reduction targets. Figure 1: Hilton ESG Report (2021)
6
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Part V: Macroeconomic Environment
The environmental impact of 2030 Goals has been reevaluated in 2022. After COVID-19 era, Hilton has implemented strategies to conserve energy and water by reducing intermediate housekeeping unless specifically requested. Hilton partnered with soap recycling program and focused on food waste reduction and donation programs. Although the impact of COVID-19 imposed high risk to the hospitality industry, Hilton is still on track to commit to the 2030 environment goal while being in operation. Contraction in the global economy is affecting the sales and profitability, which is limiting growth for investors and society. Part VI: Decision
Following the investor protocol, the risk associated with purchasing stock at this time is not favorable. Considering Hilton’s loyalty program and other environmental factors, the market share may be overlooked and considered for adaptation. My overall advice is to wait a while to see if the stock price will decrease soon to match or be less than the implied share price. Having the stock price decrease will increase future investment, but having the stock price increase will favor current investors based on profitability.
7
References
Governance documents
. (n.d.). https://ir.hilton.com/corporate-governance/governance-
documents
Investor relations
. (n.d.). https://ir.hilton.com/
Journal, W. S. (n.d.). HLT | Hilton Worldwide Holdings Inc. Stock Price & News - WSJ
. WSJ. https://www.wsj.com/market-data/quotes/HLT
SEC filings
. (n.d.). https://ir.hilton.com/financial-reporting/sec-filings
Yahoo Finance
. (n.d.-b). https://finance.yahoo.com/quote/HLT/financials?p=HLT
8
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