FlyerTalk Forums - View Single Post - Starwood Corporate : exploring options to boost value inc acquiring or being acquired
Old Apr 18, 2015, 9:42 am
  #11  
accidental_tourist
 
Join Date: Apr 2005
Location: Paris, France
Programs: HHonor Diamond, SPG Plat100, HGP Plat, AF Plat, *A G (A3)
Posts: 155
Exclamation Over-the-top "Greed is good"

Originally Posted by bocastephen
Then maybe this community needs to begin organizing (remember the SaveSkyMiles movement) and bring in franchisees, employees and other non-FT customers to organize our own no-merger activist movement?
Warren Buffett always advocates that shareholders buy products of their investee firms. But with rampant "activist" hedge fund activities, we may soon be forced to buy stocks of companies we like, just to ensure their survival...

In no way are Starwood shares cheap: at 25x P/E (2015e), they are almost on a par with Hilton (27.9x), La Quinta (26.4x); and definitely better appreciated than Marriott (19.8x) and Wyndham (15.5x). Starwood's cashflow (EBITDA) is even better valued at 13.7x (2015e), vs. Hilton (13.5x), La Quinta (11.1x), Marriott (11.1x). For crying out loud, Starwood also has the highest dividend yield compared to the rest. [Thanks Goldman for the estimates]

Only trouble for Starwood: it has been too richly valued at the start, so it LAGS the spectacular share price boom in the last 12 months...

Only apparent strategic "mistake" of Starwood: not having too much debt on its balance sheet (this will probably be on the "white paper" proposal of the hedge funds). But listen: hotel occupancy at 64.7% end 2014 is already above the last cycle peak (63.5% in 2005). The last time hotel occupancy had been even higher was in 1994... Add to that, room additions in the next two years are expected to exceed the last five. Can we accuse Starwood for not taking up enough debt??

Customer loyalty used to be the litmus test for company valuation. But these days turning quick profits of short-term shareholders (=activist hedge fund) trump the value of loyal premium customer loyalty (Burn the SPG program, merge it with IHG for the lower end client base to boost short-term bottom line, to have more "growth" is executing precisely that. Remember: your Starpoints are long term investment by Starwood to ensure you come back, and pay maybe a 5-10% premium over the cheapest alternative).

Now I understand why there is no Q2 promotion from SPG - management needs to boost the short-term profit to show the financial analysts that there is "growth". Maybe they should actually publicize this in a high-profile way so that long-term SPG clients know that they are actively contributing to the survival of their brand? (BUT then isn't it pathetic that LT clients need to do that, alongside donations to the UNICEF children fund???)

Too bad that Starwood had not been bought out by Buffett during the crisis...

And I'll leave it to the American members on this Board to comment on the Tax Inversion idea.
accidental_tourist is offline