Wyndham - V2 Alejandra

8/10/2019 Wyndham - V2 Alejandra

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Ross Investment Competition


Ticker: ABC

Team #


2014 Competition

Dec 4 & 5, 2014

Ann Arbor, MI

Name 1

Name 2

Name 3Name 4


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Wyndham Worldwide Corporation

Recommendation BUY

Current Price: $82.30

Target Price 1yr: $82.30

Upside: 20%

NYSE:WYN Market Cap: $10.14B Dividend Yield: 1.8%


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Outlinei. Company Description

ii. Stock Performance

iii. Investment Thesisa.

b.

c.

iv. Assumptions

v. Valuation

vi. Recommendation

vii. Appendix


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Wyndham Worldwide CorporationLeading provider of hospitality products and services

A. Hotel Group Division

B. Vacation Ownership Division

C. Vacation Exchange and Rental Division

90% of their properties located in the US and Europe

Timeshare

WYM R.Condominium International (RCI) Global Vacation Network

Lodging Franchising


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Ross Investment CompetitionInvestment Thesis


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Stock PerformanceWyndham (WYN)

Industry: Consumer Discretionary

52 wk Range: $66.32 - $82.94

Volume: $1.7mm

Short Interest: XXXX%


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AppendixNYSE:WYNA. INDUSTRY

Industry trends

Inorganic growthMkt Consolidation

B. STOCK PERFORMANCE

Stock performanceRelative to Peers

C. PEER GROUP ANALYSIS

Multiples AnalysisGroup A (2)

Multiples AnalysisGroup B (2)

D. VALUATION

DCF Valuation

Financials Summary (2)

Income Statement

Balance Sheet (2)

Cash Flow Statement (2)

Company Profile

Wyndham Worldwide Corp. offers individual consumers and businesscustomers a broad array of hospitality services and products across

various accommodation alternatives through its portfolio of brands. It

operates through three business segments: Lodging, Vacation Exchange

& Rentals, and Vacation Ownership. The Lodging segment franchises

hotels in the upscale, upper midscale, midscale, economy and extended

stay segments and provides hotel management services for full-service

and select limited-service hotels. The Vacation Exchange & Rental

segment provides vacation exchange services and products to owners of

intervals of vacation ownership interests and markets vacation rental

properties primarily on behalf of independent owners. The VacationOwnership segment develops, markets and sells vacation ownership

interests to individual consumers, provides consumer financing with the

sale of vacation ownership interests and provides property management

services at resorts. The company was founded on July 31, 2006 and is

headquartered in Parsippany, NJ.


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Industry Trends


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Inorganic GrowthWYN and Industry Trends

Interest to grow inorganically in the lodging business.

Bid to buy IHG to grow lodging (1) and vacation rentals (3) didnt go through.


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Stock PerformanceRelative to Peers


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Multiples AnalysisHotel Group Set AOperational Data

Peer Hotel SetGross

Margin %

EBITDA

Margin %

N.Income

Margin %

Revenues,

1 Yr

Growth %

EBITDA,

1 Yr

Growth %

N. Income ,

1 Yr

Growth %

T.Debt/

Capital %

T.Debt/

EBITDAMkt Cap

Market CapitalizationLatest

Hilton Worldw ide Holdings Inc. (NYSE:HLT) 40.4% 28.4% 8.08% 7.05% 1.33% 20.22% 71.75% 6.4x 25,748

Starwood Hotels & Resor ts Wor ldw ide Inc . (NYSE:HOT) 46.8% 33.1% 15.99% (7.37%) (7.54%) (18.80%) 53.14% 2.2x 13,854

Marriott International, Inc. (NasdaqGS:MAR) 69.4% 46.8% 26.34% 2.76% 9.30% 7.77% 209.25% 2.8x 21,830

Hyatt Hotels Corporation (NYSE:H) 36.3% 24.1% 7.15% 8.08% 16.76% 1.57% 23.32% 2.2x 8,856

Choice Hotels International Inc. (NYSE:CHH) 56.7% 29.6% 16.36% 0.82% 3.84% 4.91% 201.87% 3.6x 3,114

Marriott Vacations Worldw ide Corp. (NYSE:VAC) 46.5% 16.3% 6.39% (0.66%) 0.00% 36.51% 33.84% 2.6x 2,385

Accor S.A. (ENXTPA:AC) 16.0% 16.1% 2.77% (1.49%) 0.34% - 41.84% 3.0x 10,575

Extended Stay America, Inc. (NYSE:STAY) 53.1% 43.0% 7.25% 7.62% 5.00% 39.14% 67.66% 5.7x 3,818

Intercontinental Hotels Group plc (LSE:IHG) 58.1% 37.4% 14.40% (0.95%) (3.44%) (55.45%) 1 07.08% 1.9x 9,780

La Quinta Holdings Inc. (NYSE:LQ) 54.9% 35.9% (35.58%) 10.24% 7.54% - 70.74% 5.7x 2,808

Wyndham Worldw ide Cor porat ion (NYSE:WYN) 52.7% 23.1% 10.2% 6.9% 7.7% 25.4% 77.5% 4.0x 10,145

High 69.4% 46.8% 26.34% 10.24% 16.76% 39.14% 209.25% 6.4x

Low 16.0% 16.1% (35.58%) (7.37%) (7.54%) (55.45%) 23.32% 1.9x

Mean 47.8% 31.1% 6.92% 2.61% 3.31% 4.48% 88.05% 3.6x

Median 50.0% 31.4% 7.67% 1.79% 2.59% 6.34% 69.20% 2.9x


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Multiples AnalysisHotel Group Set A - Ratios

Peer Hotel Set EV/REV TEV/EBITDA P/E

Hilton Worldw ide Holdings Inc. (NYSE:HLT) 5.6x 19.4x 46.9x

Starw ood Hotels & Resorts Worldw ide Inc. (NYSE:HOT) 4.8x 14.1x 28.0x

Marriott International, Inc. (NasdaqGS:MAR) 9.4x 20.0x 32.8xHyatt Hotels Corporation (NYSE:H) 3.7x 15.0x 47.3x

Choice Hotels International Inc. (NYSE:CHH) 4.9x 16.7x 26.9x

Accor S.A. (ENXTPA:AC) 1.6x 10.2x 54.8x

Extended Stay America, Inc. (NYSE:STAY) 6.0x 14.1x 43.1x

Intercontinental Hotels Group plc (LSE:IHG) 6.2x 16.6x 40.4x

La Quinta Holdings Inc. (NYSE:LQ) 4.9x 13.6x NM

Wyndham Worldw ide Corporation (NYSE:WYN) 2.8x 12.1x 19.8x

High 9.4x 20.0x 54.8x

Low 1.6x 10.2x 26.9x

Mean 5.2x 15.5x 40.0x

Median 4.9x 15.0x 41.8x


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DCF ValuationWindham Worldwide Corporation Model


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DCF ValuationWindham Worldwide Corporation Price Sensitivity


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Financial SummaryBalance Sheet and Cash Flow


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12 months

Dec-31-2009

12 months

Dec-31-2010

12 months

Dec-31-2011

12 months

Dec-31-2012

12 months

Dec-31-2013

LTM

12 months

Sep-30-2014

U SD USD USD U SD U SD U SD

Revenue 3,541.0 3,664.0 4,099.0 4,332.0 4,733.0 4,951.0

Other Revenue 209.0 187.0 155.0 202.0 276.0 294.0

Total Re ve nue 3,750.0 3,851.0 4,254.0 4,534.0 5,009.0 5,245.0

Cost Of Goods Sold 1,823.0 1,876.0 2,025.0 2,093.0 2,392.0 2,482.0

Gross Profit 1,927.0 1,975.0 2,229.0 2,441.0 2,617.0 2,763.0

Selling General & Admin Exp. 1,093.0 1,071.0 1,221.0 1,388.0 1,471.0 1,551.0

Deprec iation & Amort. 178.0 173.0 178.0 185.0 216.0 231.0

Other Operating Exp., Total 1,271.0 1,244.0 1,399.0 1,573.0 1,687.0 1,782.0

Ope rating Incom e 656.0 731.0 830.0 868.0 930.0 9 81.0

Interest Expense (114.0) (137.0) (140.0) (132.0) (131.0) ( 118.0)

Interest and Invest. Income 7.0 5.0 24.0 8.0 9.0 9.0

Net Inte rest Exp. (107.0) (132.0) (116.0) (124.0) (122.0) (109.0)

Income/(Loss) f rom Aff iliates 1.0 1.0 3.0 - 3.0 3.0

Other Non-Operating Inc. (Exp.) - - - 2.0 3.0 2.0

EBT Excl. Unusual Items 550.0 600.0 717.0 746.0 814.0 877.0

Restructuring Charges (47.0) (9.0) (6.0) (7.0) (10.0) (10.0)Merger & Related Restruct. Charges - - - (1.0) (2.0) (2.0)

Gain (Loss) On Sale Of Invest. - - 4.0 - - (8.0)

Gain (Loss) On Sale Of Assets 5.0 6.0 4.0 - - -

Asset Writedown (15.0) (4.0) (57.0) (6.0) (8.0) (8.0)

Insurance Settlements - - - 4.0 - -

Other Unusual Items - (30.0) (12.0) (108.0) (111.0) 0

EBT Incl. Unusual Items 493.0 563.0 650.0 628.0 683.0 849.0

Income Tax Expense 200.0 184.0 233.0 229.0 250.0 314.0

Earnings from Cont. Ops. 293.0 379.0 417.0 399.0 433.0 535.0

Minority Int. in Earnings - - - 1.0 (1.0) (1.0)

Net Income 293.0 379.0 417.0 400.0 432.0 534.0

Source: Capital IQ

Income StatementFull Report


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Balance SheetTotal Assets

Dec-31-2009 Dec-31-2010 Dec-31-2011 Dec-31-2012 Dec-31-2013 Sep-30-2014 CAGR

USD USD USD USD USD USD 2010-2013

ASSETS

Cash And Equivalents 155.0 156.0 142.0 195.0 194.0 252.0

Total Cash & ST Investments 155.0 156.0 142.0 195.0 194.0 252.0 8%

Accounts Receivable 693.0 720.0 706.0 760.0 810.0 751.0

Other Receivables 57.0 51.0 69.0 63.0 123.0 1.0

Total Receivables 750.0 771.0 775.0 823.0 933.0 752.0 7%

Inventory 354.0 348.0 351.0 379.0 346.0 306.0

Prepaid Exp. 116.0 104.0 121.0 122.0 153.0 143.0

Deferred Tax Assets, Curr. 189.0 179.0 153.0 157.0 108.0 97.0

Restricted Cash 88.0 119.0 124.0 121.0 121.0 127.0

Other Current Assets 88.0 75.0 64.0 69.0 85.0 165.0

Total Current Assets 1,740.0 1,752.0 1,730.0 1,866.0 1,940.0 1,842.0 3%

Gross Property, Plant & Equipment 1,686.0 1,878.0 2,039.0 2,324.0 2,691.0 -

Accumulated Depreciation (733.0) (837.0) (922.0) (1,032.0) (1,136.0) -

Net Property, Plant & Equipment 953.0 1,041.0 1,117.0 1,292.0 1,555.0 1,522.0 14%

Long-term Investments 10.0 13.0 10.0 8.0 7.0 -

Goodw ill 1,386.0 1,481.0 1,479.0 1,566.0 1,590.0 1,571.0 2%

Other Intangibles 1,051.0 1,171.0 1,131.0 1,189.0 1,152.0 1,124.0

Accounts Receivable Long-Term 2,792.0 2,687.0 2,551.0 2,571.0 2,448.0 2,411.0

Other Long-Term Assets 1,420.0 1,271.0 1,005.0 971.0 1,049.0 1,087.0

Total Assets 9,352.0 9,416.0 9,023.0 9,463.0 9,741.0 9,557.0 1%


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Balance SheetTotal Liabilities + Equity

Dec-31-2009 Dec-31-2010 Dec-31-2011 Dec-31-2012 Dec-31-2013 Sep-30-2014 CAGR

U SD U SD U SD U SD U SD U SD 2010-2013

LIABILITIES

Accounts Payable 260.0 274.0 278.0 307.0 360.0 310.0

Accrued Exp. 489.0 507.0 503.0 530.0 534.0 736.0

Curr. Port. of LT Debt 384.0 234.0 242.0 544.0 233.0 241.0 0%

Curr. Income Taxes Payable 63.0 74.0 93.0 103.0 120.0 -

Unearned Revenue, Current 417.0 401.0 402.0 383.0 451.0 460.0

Other Current Liabilities 272.0 85.0 45.0 64.0 92.0 64.0

Total Current Liabilities 1,885.0 1,575.0 1,563.0 1,931.0 1,790.0 1,811.0 4%

Long-Term Debt 3,183.0 3,537.0 3,783.0 4,021.0 4,621.0 4,623.0 9%

Unearned Revenue, Non-Current 267.0 206.0 182.0 207.0 192.0 201.0

Pension & Other Post-Retire. Benefits 10.0 11.0 13.0 18.0 15.0 -

Def. Tax Liability, Non-Curr. 1,137.0 1,021.0 1,065.0 1,141.0 1,173.0 1,185.0

Other Non-Current Liabilities 182.0 149.0 185.0 214.0 325.0 326.0Total Liabilities 6,664.0 6,499.0 6,791.0 7,532.0 8,116.0 8,146.0 8%

Common Stock 2.0 2.0 2.0 2.0 2.0 2.0

Additional Paid In Capital 3,733.0 3,892.0 3,818.0 3,820.0 3,858.0 3,875.0

Retained Earnings (315.0) (25.0) 293.0 558.0 832.0 1,146.0

Treasury Stock (870.0) (1,107.0) (2,009.0) (2,601.0) (3,191.0) (3,672.0)

Comprehensive Inc. and Other 138.0 155.0 128.0 151.0 122.0 57.0

Total Common Equity 2,688.0 2,917.0 2,232.0 1,930.0 1,623.0 1,408.0 -18%

Minority Interest - - - 1.0 2.0 3.0

Total Equity 2,688.0 2,917.0 2,232.0 1,931.0 1,625.0 1,411.0

Total Liabilities And Equity 9,352.0 9,416.0 9,023.0 9,463.0 9,741.0 9,557.0 1%


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Cash Flow StatementCash Flow from Operations

12 months

Dec-31-2009

12 months

Dec-31-2010

12 months

Dec-31-2011

12 months

Dec-31-2012

12 months

Dec-31-2013

LTM

12 months

Sep-30-2014 CAGR

U SD USD USD U SD USD USD

2010-2013

Net Income 293.0 379.0 417.0 400.0 432.0 534.0 4%

Depreciation & Amort. 150.0 145.0 146.0 154.0 180.0 195.0

Amort. of Goodw ill and Intangibles 28.0 28.0 32.0 31.0 36.0 36.0

Depreciation & Amort., Total 178.0 173.0 178.0 185.0 216.0 231.0 8%

(Gain) Loss On Sale Of Invest. 6.0 - 13.0 - - 8.0 n.a.

Asset Writedown & Restructuring Costs 24.0 4.0 44.0 8.0 8.0 8.0 26%

Provision for Credit Losses 449.0 340.0 339.0 409.0 349.0 274.0 1%

Stock-Based Compensation 37.0 39.0 42.0 41.0 53.0 58.0 11%

Tax Benefit from Stock Options - (14.0) (18.0) (33.0) (15.0) (36.0) 2%

Other Operating Activities 165.0 153.0 100.0 207.0 197.0 65.0 9%

Change in Acc. Receivable (107.0) (188.0) (187.0) (322.0) (318.0) (268.0) 19%

Change In Inventories (9.0) 54.0 79.0 95.0 32.0 57.0 n.a.

Change in Acc. Payable (54.0) (52.0) 41.0 18.0 46.0 88.0 n.a.

Change in Unearned Rev. (315.0) (82.0) (20.0) (7.0) 39.0 15.0 n.a.

Change in Other Net Operating Assets 22.0 (171.0) (25.0) 3.0 (31.0) 15.0 n.a.

Cash from Ops. 689.0 635.0 1,003.0 1,004.0 1,008.0 1,049.0 17%


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Cash Flow StatementCF from Investing and Financing

12 months

Dec-31-2009

12 months

Dec-31-2010

12 months

Dec-31-2011

12 months

Dec-31-2012

12 months

Dec-31-2013

LTM

12 months

Sep-30-2014 CAGR

U SD U SD U SD U SD U SD U SD 2010-2013

Capital Expenditure (135.0) (177.0) (244.0) (222.0) (303.0) (260.0) 20%

Sale of Property, Plant, and Equipment 5.0 20.0 31.0 1.0 6.0 5.0 -33%

Cash Acquisitions - (236.0) (27.0) (263.0) (129.0) (19.0) -18%

Invest. in Marketable & Equity Securt. (13.0) - (12.0) (42.0) (3.0) (10.0) n.a.

Other Investing A ctivities 34.0 (25.0) (4.0) 7.0 28.0 15.0 -204%

Cash from Inves ting (109.0) (418.0) (256.0) (519.0) (401.0) (269.0) -1%

Short Term Debt Issued - - - 273.0 - - n.a.

Long-Term Debt Issued 2,688.0 3,716.0 4,066.0 4,655.0 3,078.0 - n.a.

Total Debt Issued 2,688.0 3,716.0 4,066.0 4,928.0 3,078.0 2,162.0 -6%

Short Term Debt Repaid - - - - (63.0) - n.a.Long-Term Debt Repaid (3,162.0) (3,641.0) (3,841.0) (4,598.0) (2,832.0) - n.a.

Total Debt Re paid (3,162.0) (3,641.0) (3,841.0) (4,598.0) (2,895.0) (2,046.0) -7%

Issuance of Common Stock - 40.0 11.0 13.0 - - n.a.

Repurchase of Common Stock - (235.0) (893.0) (631.0) (593.0) (597.0) 36%

Common Dividends Paid (29.0) (86.0) (99.0) (134.0) (156.0) (173.0) 22%

Total Dividends Paid (29.0) (86.0) (99.0) (134.0) (156.0) (173.0) 22%

Special Dividend Paid - - - - - - n.a.

Other Financing Activities (58.0) (13.0) 3.0 (9.0) (39.0) (135.0) n.a.

Cas h from Financing (561.0) (219.0) (753.0) (431.0) (605.0) (789.0) 40%

Foreign Exchange Rate Adj. - 3.0 (8.0) (1.0) (3.0) (8.0) n.a.

Net Change in Cash 19.0 1.0 (14.0) 53.0 (1.0) (17.0) n.a.


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Wyndham Quarterly Analysis

Wyndham - V2 Alejandra

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