Raymond James bumps Hyatt rating as $2 bln resort sale eases balance sheet worries

Published 01/07/2025, 17:30
© Reuters

Investing.com -- Raymond James on Tuesday upgraded Hyatt Hotels Corp to Strong buy and lifted its price target to $165, saying a $2 billion deal to offload recently acquired Playa Hotels & Resorts real‑estate assets removes a “significant overhang” on the stock.

Hyatt shares were up about 5% Tuesday at $146 in trading.

RJ said the agreement to sell all 15 Playa resorts to Tortuga Resorts, a joint venture between KSL Capital Partners (WA:CPAP) and Mexico’s Rodina, came sooner than expected, covered the full portfolio and accelerates Hyatt’s target of raising $2 billion from asset sales by 2027.

The deal values the properties at roughly eight times forecast 2024 earnings before interest, tax, depreciation and amortisation and is due to close before year‑end 2025.

Raymond James wrote that the transaction “removes a significant overhang on the stock” and praised management’s execution despite macro‑economic uncertainty.

It called investors’ muted initial reaction “a bit of a head‑scratcher,” arguing progress on disposals was more important than the sale multiple.

The broker noted Hyatt now trades about 2.5 EBITDA turns below Marriott International (NASDAQ:MAR.O) and five turns below Hilton Worldwide (NYSE:HLT) even though more than 90% of Hyatt’s earnings are expected to come from fee‑based, asset‑light operations by 2027.

Hyatt has lagged Marriott by nine percentage points and Hilton by 19 points so far this year, it added.

Following the divestiture, Hyatt’s net purchase price for Playa’s management contracts falls to roughly $555 million, or about nine times projected 2026 EBITDA, with a potential $143 million earn‑out tied to performance.

The company will keep $200 million of preferred equity in the venture and retain 50‑year management agreements on 13 of the resorts, preserving fee income while lightening its balance sheet.

Hyatt bought Playa for $2.6 billion only two weeks ago to expand in the fast‑growing all‑inclusive segment. The swift flip of the bricks‑and‑mortar assets “underscores management’s commitment to an asset‑light strategy,” Raymond James said.

 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.